Those who believed that Germany completely eschewed nationalism following the conclusion of the Second World War in 1945, may find it perplexing to reconcile with the vehement reactions from Berlin to UniCredit’s clandestine move to acquire Commerzbank. The revelation that the institution based in Milan was nearing a hold of nearly 20% in Mercedes-Benz’s second largest bank incited vehement outcry among prominent politicians in Germany, both domestically and abroad.
Forcefully expressing his disapproval from the United Nations General Assembly in New York, Chancellor Olaf Scholz indicated that antagonistic advances and hostile takeover bids are detrimental to the banking sector. Echoing the sentiment back home in Berlin, Christian Lindner, the liberal finance minister, referred to UniCredit’s actions as being somewhat unconventional in nature.
However, critics have quipped that this display is no more unconventional than the path that Berlin’s ruling coalition took to reach this scenario. Dealing with substantial gaps in his budge, Lindner ordered his officials to initiate the long-overdue sale of the German government’s interest in Commerzbank, which dates back to the banking crisis between 2008 and 2010.
Berlin seemed taken aback when they had to honour their end of the auction by selling to the highest bidder: UniCredit. Concurrently, Andrea Orcel, the CEO of UniCredit, declared that his institution had discreetly accrued another 4.5% through derivative-linked contracts and had the intention to augment that stake.
Berlin’s astonishment could be considered unexpected as ING, BNP Paribas and UniCredit have all shown interest in Commerzbank’s stakes whenever it was suggested it would be sold. Of less surprise, however, was Berlin’s indignation at UniCredit’s Monday announcement of indirectly attaining access to an additional 11.5% of Commerzbank’s shares.
Should regulatory approval be granted, UniCredit’s 21% stake would make it the majority shareholder in Commerzbank, nearly doubling the government’s remaining 12% stake. If UniCredit’s stake reaches 30%, at which point both Commerzbank and Berlin are determined to prevent, UniCredit would be legally required to submit a public takeover bid.
This onslaught from the Alpine region has sparked outrage within Frankfurt, as well as the nearby state of Hesse.
Boris Rhein, the governor from the centre-right Christian Democratic Union (CDU), criticised the Scholz-Lindner auction, claiming it essentially handed over a major financier of Germany’s small and medium-sized enterprise sector to a foreign bank’s interests. Rhein expressed this concern in an interview with the Handelsblatt newspaper, advocating against the abandonment of their “flagship”.
Jens Weidmann, the chairperson of Commerzbank, who managed the state’s purchase during the banking crisis while working as Angela Merkel’s financial consultant, indicated anxieties over the bank’s autonomy. Meanwhile, trade unions are apprehensive about substantial employee reductions.
Objectively, experienced financial specialists in Frankfurt perceive this as an inevitable result of the Italian bank’s key potency and the German bank’s primary shortcoming – profitability. Dieter Hein, a banking analyst based in Frankfurt with Fairesearch, said “The authorities may not have means to thwart a takeover, nor does the economics ministry possess any pertinent excuse” He also mentioned the presence of national pride in such matters.
The Commerzbank tower stands tall at 260 metres, a prominent feature in Frankfurt’s skyline designed by Sir Norman Foster. Having been established 154 years ago, the bank’s history traces back to Hamburg, then Dusseldorf, before it finally settled in Frankfurt in 1990. As of today, it is the second biggest bank in Germany, bringing in revenues of €10.5 billion and employing approximately 42,000 people globally, with some 38,000 workers based in Germany.
Throughout its time in Frankfurt, Commerzbank struggled with identity issues and minimal profitability in a divided banking market where public savings and state-owned banks wield considerable influence.
In an attempt to adapt, Commerzbank made a series of unsuccessful ventures for pan-European banking collaborations in the 1990s with France’s Crédit Lyonnais, Société Générale, and NatWest in the UK.
Analysts attribute outgoing CEO, Manfred Knof, with successfully refocusing Commerzbank and bringing it closer to standard European profitability ratios.
The bank had to combat a calamitous legacy left by its acquisition of Dresdner Bank in 2009, in the aftermath of the Lehman Brothers’ collapse. The issues with Dresdner’s ledger further exacerbated Commerzbank’s own past unsuccessful ventures into investment banking, endangering the institution’s survival.
After receiving a boost of €18 billion, the German government acquired a silent 25% stake in Commerzbank. The initiation of the stake’s sell-off has catalysed a speculated takeover bid. German analysts with a pragmatic perspective see UniCredit, given their familiarity with the German market and a history of surprising German politicians, as the best fit for Commerzbank. The Milan based entity stunned everyone when they secured Bavaria’s prestigious HypoVereinsbank (HVB) for €15 billion in an aggressive move back in 2005. Post the acquisition, the workforce of the once esteemed institution has been reduced by fifty percent, profitability has surged and all crucial decisions now happen in Milan. Analyst Dieter Hein predicts a similar trajectory for Commerzbank as UniCredit’s Chief Executive Officer, Andrea Orcel, waits for Germany to acknowledge his banking reality. Hein criticises the old school Frankfurt gentlemen for their, according to him, failure in revamping Commerzbank and consequently predicts a bleak future for Commerzbank’s autonomy.