The Dutch government on Tuesday said it will reduce its stake in lender ABN Amro by a quarter to 30% through a trading plan.
Shares of the Dutch bank traded 1.2% lower at the market open and was last down 0.6% as of 9:15 a.m. London time.
The Dutch government, which currently holds a 40.5% interest in ABN Amro, announced via its investment vehicle firm NLFI that it will sell shares using a pre-arranged trading plan set to be executed by Barclays Bank Ireland.
ABN Amro was bailed out by the state during the 2008 financial crisis and later privatized in 2015. The government started reducing its shareholding in the firm last year.
The banking sector has been in the spotlight of late, after UniCredit‘s move to take a stake in German lender Commerzbank sparked questions on cross-border mergers in Europe and the lack of a complete banking union in the region.
Governments have been capitalizing on a rebound in shares to sell their shareholdings in banks that were taken over during the financial crisis. The U.K. and German administrations have both made moves this year to reduce their respective shareholdings in NatWest and Commerzbank.
A Commerzbank AG bank branch, in the financial district of Frankfurt, Germany, on Thursday, Sept. 12, 2024.
Krisztian Bocsi | Bloomberg | Getty Images
Commerzbank and UniCredit are set to begin talks Friday, with the German bank on the defensive over a potential takeover after its Italian counterpart unexpectedly increased its stake earlier this month.
Incoming Commerzbank Chief Executive Bettina Orlopp on Thursday said the two banks would “exchange views” Friday, Reuters reported. Speaking at a financial conference, Orlopp said the German bank was open minded, but that the speed of synergies and risks needed to be considered.
UniCredit earlier this month took a 9% stake in Commerzbank, before looking to boost it to 21% earlier this week and putting in a request to hold as much as a 29.9% stake in the German bank, hinting at a potential takeover bid. The action took the German government, which also owns a stake in the bank, and the management of Commerzbank by surprise.
Orlopp said Thursday she would not get involved with “crazy” sell-downs or “stupid things,” according to Reuters.
A 10-year veteran of Commerzbank, Orlopp was announced Tuesday as the incoming CEO, replacing Manfred Knof who is set to leave the bank at the end of this month.
Her comments on Thursday came as the bank’s board of managing directors and supervisory board unanimously said they supported Commerzbank’s current strategy at an annual meeting. Germany’s second-largest lender said in a Thursday statement that the implementation of its strategy plans until 2027 was “progressing rapidly.”
“Commerzbank is continuously expanding its independent position as a strong pillar in the German banking market and a reliable partner to the domestic economy,” Jens Weidmann, chairman of the supervisory board, commented.
The statement also noted that the board of managing directors was now expecting the bank’s return on tangible equity and payouts to shareholders to be bigger than so far anticipated.
The potential for a takeover or merger has been met with opposition from Germany’s government and several senior figures at Commerzbank. Supervisory board member Stefan Wittmann this week told CNBC he hoped a hostile takeover could be avoided, and said major job losses could occur if it became a reality.
Some investors however have in recent days suggested they would be open to talks about a potential merger.
Orlopp herself earlier this month told journalists that the process had taken Commerzbank by surprise, but urged a calm approach.
Bettina Orlopp, chief financial officer of Commerzbank AG, speaks during a fourth quarter earnings news conference at the bank’s headquarters in Frankfurt, Germany, on Thursday, Feb. 13, 2020.
Alex Kraus | Bloomberg | Getty Images
Commerzbank announced Tuesday it has picked 10-year veteran, and current Chief Financial Officer Bettina Orlopp to helm the bank as chief executive as it seeks to fend off a potential hostile takeover from Italian bank UniCredit.
The bank has been on the defensive as UniCredit looks to become its largest shareholder, signaling the potential for a full takeover.
Earlier this month, the Milan-based bank started building its shareholding with a 9% stake in Commerzbank. UniCredit then announced this week it had acquired additional Commerzbank shares, taking its stake in the German lender to around 21%, and submitted a request to increase its holdings to 29.9%.
Senior officials at Commerzbank and the German government, which was the company’s largest shareholder until UniCredit stepped in, have both said they oppose a hostile takeover. Orlopp will now be put in charge of leading the fight.
Commerzbank said in a late Tuesday statement that its supervisory board is aiming for current Chief Executive Manfred Knof to hand over his duties to Orlopp, “in the near future.” The firm added that the board had agreed unanimously on Orlopp succeeding Knof after an internal and external search for candidates.
Later on Wednesday the bank announced Knof will leave the company at the end of the month on September 30.
Orlopp’s contract is set out for five years, Commerzbank said, noting that the search for her replacement as CFO is still underway. The CFO said she was “looking forward to this new challenge,” while also noting that “significant tasks lie ahead.”
“Together with all our key partners, we will navigate through the challenges ahead of us successfully,” she said.
Since March 2020, Orlopp has been Commerzbank’s CFO, covering finance, investor relations, tax and treasury departments, according to her bio on the bank’s website. Most recently she was also the deputy chairwoman of the board of directors at the German bank, a position she has held since 2021.
The 54-year-old banker initially joined Commerzbank in 2014 as a divisional board member for group development and strategy. Since then, Orlopp has worked as an executive board member and then member of the board of managing directors overseeing areas including compliance, legal and human resources divisions.
Prior to her time at Commerzbank, Orlopp worked at McKinsey for 19 years. She holds a business administration diploma from the University of Regensburg, where she also completed a doctorate in finance.
Orlopp told journalists last week that current developments with UniCredit were unexpected, but urged calm.
“We have all been very surprised by the process,” she said according to Reuters. “That’s why the most important thing now is simply to sort it out calmly, to think about what’s on the table now and how to deal with it,” she added.
Other officials at Commerzbank have been more direct in sharing their concerns about a tie-up with the Italian bank. Stefan Wittman, supervisory board member at Commerzbank, on Tuesday told CNBC “we certainly hope we can avoid” a hostile takeover and warned that major job losses could occur if UniCredit took over.
This is not Orlopp’s first tumultuous time at Commerzbank. She was at the bank when it began the process of restructuring in 2016 and throughout periods of merger considerations, including interest from Deutsche Bank in 2018 and 2019.
When Orlopp became CFO in 2020, the bank was facing pressure from U.S. private equity group Cerberus, which at the time held an around 5% stake in Commerzbank, according to Reuters. The activist investor demanded personnel and strategy — including cost cutting — changes at the German lender.
The pressure from shareholders to reduce costs saw both the CEO and chairman of the supervisory board at the time, resign from their positions. Knof was then named CEO in 2020 and officially took on the role in 2021.
Thomas Schweppe, founder of 7Square, on Wednesday told CNBC that he believed it was important that the decision to make Orlopp CEO was taken quickly. “The situation is untenable. You cannot defend a company without a credible CEO,” he said.
Orlopp’s extensive experience at Commerzbank will allow her to hit the ground running, which is “very very important,” Schweppe said.
“At the same time obviously she has been part of some decisions that potentially led to the, you know, difficult situation Commerzbank finds itself now in,” he added.
15 February 2024, Hesse, Frankfurt/M.: The lettering “Commerzbank” can be seen on the Commerzbank Tower in the center of the banking city. Boosted by the turnaround in interest rates, Commerzbank is aiming for another profit increase after a record year. Photo: Helmut Fricke/dpa (Photo by Helmut Fricke/picture alliance via Getty Images)
Two-thirds of the jobs at Commerzbank could disappear if UniCredit successfully carries out a hostile takeover of the German lender, a Commerzbank supervisory board member warned on Tuesday.
Stefan Wittmann, who is also a senior official at German trade union Verdi, told CNBC’s Annette Weisbach that “we certainly hope we can avoid” a hostile takeover by the Italian bank. Witmann said Commerzbank’s board had called on the German government to carry out an internal review of the possible takeover, which he hopes will give the bank a six-month period to take stock of the situation.
“But if it [a hostile takeover] is unavoidable, we think that two-thirds of jobs will disappear, that there will be another significant cut in the branches,” he said, according to a translation.
“We will see in particular that UniCredit does not want all Commerzbank customers at all, but that it focuses on the supposedly best customers, namely the wealthy customers,” he added.
Berlin, which was the largest shareholder of Commerzbank after it injected 18.2 billion euros ($20.2 billion) to rescue the lender during the 2008 financial crisis, is likely to play a key role in any potential merger between the banks.
“We are actually concerned with our economic and industrial responsibility. As far as the workforce is concerned, which trade unions are of course particularly focused on, they would always lose out in the merger, regardless of the point in time,” Wittmann said. The bank has yet to respond to a request for comment on Wittmann’s statements.
UniCredit announced Monday it had increased its stake in the German lender to around 21% and submitted a request to boost that holding to up to 29.9%, signaling a takeover bid might be in the cards. Earlier this month, the Italian bank took a 9% stake in Commerzbank, confirming that half of this shareholding was acquired from the German government.
UniCredit believes substantial value can be unlocked within Commerzbank, Germany’s second-largest lender, but it said that further action is required for that value to be “crystalized.”
German Chancellor Olaf Scholz criticized UniCredit’s move on Monday, saying, “unfriendly attacks, hostile takeovers are not a good thing for banks and that is why the German government has clearly positioned itself in this direction,” Reuters reported.
Commerzbank’s supervisory board is due to meet this week to discuss UniCredit’s stake, people familiar with the matter who asked to remain anonymous previously told CNBC.
Wittmann said the mood is currently “very tense” within the company, adding that the bank was surprised by UniCredit’s announcement on Monday, which he described as a “180 degree-turn within 48 hours.”
“[UniCredit CEO Andrea Orcel] last spoke on Friday that he wanted a friendly takeover in agreement with all stakeholders and politicians. And yesterday we were surprised by his hostile takeover attempt. That doesn’t add up,” Wittmann said.
The supervisory board member explained that the two main reasons to regard a potential merger in a critical light are the lack of a banking union in Europe, and the fact that UniCredit has “absorbed itself with Italian government bonds in recent years.”
He questioned what might happen should geopolitical tensions or “upheavals” impact UniCredit’s availability of capital to finance Commerzbank’s industry.
In response to the 2008 financial crisis, the European Commission announced plans to create a banking union to improve the regulation and supervision of banks across the region.
Economist and former European Central Bank Governor Mario Draghi flagged in a recent report that banks in Europe face regulatory hurdles which “constrain their capacity to lend,” also citing the “incomplete” banking union as one factor that impacts competitiveness for the region’s banks.
“We have always spoken out, including as employee representatives on the Supervisory Board, that there can and should be mergers at [a] European level, but only when the banking union is in place. And that is just our second point of criticism, that we say: create the rules of the game and the guardrails first, and then do it sensibly when it is clear which playing field we are on,” Wittmann said.
Commerzbank headquarters in the financial district of Frankfurt, Germany, on Sept. 12, 2024.
Bloomberg | Bloomberg | Getty Images
UniCredit announced on Monday it had increased its stake in German lender Commerzbank to around 21% and submitted a request to boost the holding to up to 29.9%.
The Italian bank acquired the additional Commerzbank shares through financial instruments, it said in a Monday statement. Earlier this month, UniCredit announced it had taken a 9% stake in Commerzbank, confirming that half of this shareholding was acquired from the German government.
“UniCredit believes that there is substantial value that can be unlocked within Commerzbank, either stand-alone or within UniCredit, for the benefit of Germany and the bank’s wider stakeholders. However, as was the case for UniCredit, such potential requires action for it to be crystalized,” the bank said on Monday.
It added that it has hedged the majority of its exposure to Commerzbank in order to provide UniCredit with “full flexibility and optionality to either retain its shareholding, sell its participation with a floored downside, or increase the stake further.”
Its next move will depend on engagement with Commerzbank’s management and supervisory boards as well as its “wider stakeholders in Germany,” the bank said.
Berlin has been a major shareholder of Commerzbank since it injected 18.2 billion euros ($20.2 billion) to rescue the lender during the 2008 financial crisis.
German government officials met last Friday to discuss the state’s shareholding in Commerzbank. They concluded that the bank is a “stable and profitable institute” and its “strategy is geared towards independence. The Federal government will accompany this until further notice by maintaining its shareholding,” the agency said in a Google-translated statement.
Shares of Commerzbank fell sharply in early trade Monday on this news, but pared losses after UniCredit announced it had increased its position and applied to acquire more.
Commerzbank shares were down 0.4% by 11:50 a.m. London time, while UniCredit shares fell 2.3%.
The state is likely to play a key role in any potential takeover of the German bank. Last week, UniCredit CEO Andrea Orcel told local media “it would be an aggressive move” for his firm to launch an unsolicited tender offer to buy out other investors in Commerzbank, Reuters reported.
Orcel also cited the German government’s “trust” in the Italian bank as the reason why it was able to buy 4.5% of the state’s stake in Commerzbank.
On Monday UniCredit noted that it has been present in Germany for nearly 20 years and stressed the importance of a “strong banking union” in Europe as being key for the bloc’s economic success.
Analysts are hoping that a move from UniCredit will encourage more cross-border consolidation in Europe’s banking sector which is often seem as more fragmented in comparison to the U.S.
The Commerzbank building (second from right) in Frankfurt am Main, western Germany, on Sept. 25, 2023.
Kirill Kudryavtsev | Afp | Getty Images
UniCredit‘s move to take a stake in German lender Commerzbank is raising questions on whether a long awaited cross-border merger could spur more acquisitions and shake up the European banking sector.
Last week, UniCredit announced it had taken a 9% stake in Commerzbank, confirming that half of this shareholding was acquired from the government. Berlin has been a major shareholder of Commerzbank since it injected 18.2 billion euros ($20.2 billion) to rescue the lender during the 2008 financial crisis.
UniCredit also expressed an interest in a merger of the two, with the Italian bank’s CEO Andrea Orcel telling Bloomberg TV that “all options are on the table,” citing the possibility that it either takes no further action or buys in the open market. Commerzbank has given a more lukewarm response to the merger proposals.
Orcel said the Italian bank was able to buy 4.5% of the state’s stake in Commerzbank because the government trusts UniCredit, Reuters reported Thursday citing local media. When asked if UniCredit would launch an unsolicited tender offer to buy out other investors in Commerzbank, the CEO told the Italian paper: “No, it would be an aggressive move.”
But analysts have welcomed the move by UniCredit, particularly because a tie-up might spur similar activity in Europe’s banking sector — which is often seen as more fragmented than in the U.S., with regulatory hurdles and legacy issues providing obstacles to mega deals.
So far, the market has responded positively to UniCredit’s move. Commerzbank shares jumped 20% on the day UniCredit’s stake was announced. Shares of the German lender are up around 48% so far this year and added another 3% on Wednesday.
Investors appreciate the geographical overlap between the two banks, the consistency in financials and an assumption that the transaction is “collaborative” in nature, UBS analysts, led by Ignacio Cerezo, said in a research note last week. According to UBS, the ball is now in Commerzbank’s court.
Analysts at Berenberg said in a note last week that a potential merger deal, “should, in theory, have a limited effect on UniCredit’s capital distribution plans.” They said that while there is “strategic merit” in a deal, the immediate financial benefits might be modest for UniCredit, with potential risks from the cross-border deal diminishing some of the benefit.
David Benamou, chief investment officer at Axiom Alternative Investments, hailed Orcel’s decision to take a stake in Commerzbank as a “fantastic move” that makes sense because of the increase in German market share it would grant UniCredit.
As Commerzbank “missed on costs in Q2 [the second quarter], currently it’s at a very low valuation, so the moment [Orcel] stepped in, is probably one of the best moments he could have,” Benamou told CNBC’s “Squawk Box Europe” last week.
When asked how imminent a takeover was in the short term, Benamou suggested it was possible, saying, “they will probably come to it.”
According to Arnaud Journois, senior vice president of European Financial Institution Ratings at Morningstar DBRS, UniCredit is already on its way to becoming a leading bank in Europe.
He told CNBC’s “Street Signs Europe” Wednesday that there was a “double logic” behind UniCredit’s move as it enables the Italian lender to access both the German and Polish markets where Commerzbank currently operates.
“UniCredit has been very active in the past two years, doing a few targeted acquisitions … So this is the next logical step,” Journois said.
UniCredit continues to surprise markets with some stellar quarterly profit beats. It earned 8.6 billion euros last year (up 54% year-on-year), also pleasing investors via share buybacks and dividends.
Analysts are hoping that a move by UniCredit will encourage more cross-border consolidation. European officials have been making more and more comments about the need for bigger banks. French President Emmanuel Macron, for example, said in May in an interview with Bloomberg that Europe’s banking sector needs greater consolidation.
“European countries might be partners, but they are still competing sometimes. So, I know that from an EU standpoint — policymaker standpoint — there is appetite for more consolidation to happen. However, we think that there are a few hurdles that make that difficult, especially on the regulatory side,” Journois told CNBC.
A cross-border styled merger between UniCredit and Commerzbank would be more preferential than a domestic merger between Deutsche Bank and Commerzbank, according to Reint Gropp, president of the Hall Institute for Economic Research.
“The German banking structure is long overdue for a consolidation process. Essentially, Germany still has almost half of all banks in the euro zone, that’s significantly more than its share in GDP. So any consolidation process would be welcome now,” Gropp told CNBC’s “Street Signs Europe” on Wednesday.
He noted that Commerzbank has always been a “big candidate for a takeover” in the German banking sector because most of the other banks in the country are savings banks which cannot be taken over by private institutions, or cooperative banks which are also difficult takeover targets.
Filippo Alloatti, head of financials at Federated Hermes, said Deutsche Bank is unlikely to present a strong rival offer for Commerzbank.
With a CET1 ratio of 13.5% compared to its target of 13%, Deutsche Bank is rather “limited.” CET ratios are used to gauge the financial strength of a lender. The German bank also has less excess capital than UniCredit and therefore “cannot really afford” a takeover, Alloatti said.
“We’ve been waiting for this,” Alloatti said, speaking about the potential for further consolidation in the sector. “If they [UniCredit] are successful, then of course, other management teams will study this case,” he said, noting that there was also scope in Italy for domestic consolidation.
Gropp acknowledged that UniCredit’s CEO had made a “very bold move” that caught both the German government and Commerzbank by surprise.
“But maybe we need a bold move to effect any changes at all in the European banking system, which is long overdue,” he said.
In comments reported by Reuters, Commerzbank’s Chief Executive Manfred Knof told reporters on Monday that he would look at any proposals from UniCredit in line with the bank’s obligations to its stakeholders.
Knof informed the bank’s supervisory board last week that he would not seek an extension of his contract which runs until the end of 2025. German newspaper Handelsblatt reported that the board might be considering an earlier change of leadership.
The supervisory board at Commerzbank will meet next week to discuss UniCredit’s stake, people familiar with the matter who preferred to remain anonymous told CNBC. There are no plans to replace Knof as soon as that meeting, the sources added.
– CNBC’s Annette Weisbach, Silvia Amaro and Ruxandra Iordache contributed to this report.
UniCredit CEO Andrea Orcel during an interview at the World Economic Forum (WEF) in Davos, Switzerland, on Jan. 18, 2024.
Bloomberg | Bloomberg | Getty Images
UniCredit‘s CEO Andrea Orcel revealed his hand this week as the Italian lender built a 9% stake in Commerzbank — and a takeover bid for the German rival could still be in the cards.
UniCredit faces a number of hurdles before increasing its stake after filing a request to “potentially exceed 9.9% of Commerzbank if and when necessary.” Commerzbank shares soared on Wednesday when news of UniCredit’s position was announced, and compounded gains on Thursday following speculation of an imminent takeover.
“All the options are on the table,” Orcel said Thursday in a Bloomberg TV interview, stressing that “it’s very simple to engage with all the stakeholders and see if the basis for a combination is there. And if it’s not, and it is the basis for sponsoring or propelling further Commerzbank in delivering a … transformation, then we will have delivered a lot of value for our shareholders as well.”
Roughly half of UniCredit’s freshly acquired stake was purchased from Commerzbank’s largest shareholder, the German government, which is seeking to gradually exit its position after injecting 18.2 billion euros ($20.05 billion) to prop up the bank during the 2008 financial crisis. The authorities, which retain a 12% shareholding, last week said that around 13.15 billion euros of the rescue sum had been repaid to date.
All eyes are now on whether UniCredit will make the leap when the German government returns to offload its shares into the market.
“There is the possibility that the government sells down further. We would be interested, at the right terms,” Orcel said Thursday. “There is the possibility that we buy in the open market. Or there is the possibility that we do nothing. But unless we ask for the authorization first, we don’t have that flexibility.”
The Italian bank already has a presence in Germany through its Munich-based lender HypoVereinsbank. In a Thursday note, Berenberg analysts stressed that a Commerzbank takeover would fit with Orcel’s broader expansion strategy and create Germany’s second-largest bank, with a market share of roughly 8% of customer loans.
“UniCredit has always seen itself as a pan-European bank and its CEO wants this to remain the case,” they said. “Expanding its presence in countries where it already has an operation is therefore compatible with this goal.”
UniCredit took a similar cross-border step last year, when it purchased a nearly 9% stake of Alpha Bank from the state-owned Hellenic Financial Stability Fund, although it has yet to make any more moves targeting the Greek bank.
Until recently, Germany’s largest lender Deutsche Bank had been seen as the prime contender to take over Commerzbank, following an abrupt collapse of initial talks in 2019. Whispers cooled in January, however, when Deutsche Bank CEO Christian Sewing said that merger and acquisition activity was not a priority for the group at the time.
A UniCredit takeover of Commerzbank would emerge as a rare, if long-awaited, instance of consolidation among Europe’s banking titans. The resource-intensive and time-consuming process is often stymied by regulatory hurdles and limits on large exposures.
Orcel, however, is angling in on Commerzbank at “probably one of the best moments he could have,” according to David Benamou of Axiom Alternative Investments.
“It’s a fantastic move, financially,” Benamou told CNBC’s Steve Sedgwick on Thursday.
He noted that the stock building comes when Commerzbank has yet to validate its August share buyback plan involving a first tranche of 600 million euros, or roughly 3.3% of its market capitalization as of Thursday, with the European Central Bank — meaning the scheme is not yet fully priced into the German bank’s “very low” valuation.
Analysts from Berenberg added that a potential acquisition of Commerzbank would “materially” reduce the odds of UniCredit pursuing domestic consolidation in Italy — where the lender backed out of talks with the world’s oldest bank, Monte dei Paschi, in 2021.
Additionally, “UniCredit would have to navigate through potential political and trade union objections about the deal, which could limit the value extraction from this acquisition. Lastly, as the combined entity would be a bigger and more complex bank, it could be faced with increased capital requirements,” Berenberg said.
Already, Commerzbank is seeking to fend off a potential acquisition, Reuters has reported, while Frank Werneke, the head of one of Germany’s largest trade unions Verdi, called on the German government to retain its share in Commerzbank “until further notice in order to avert a takeover,” according to a Google-translated statement.
Banking analysts assess the possibility of a banking merger in Italy.
Bloomberg | Bloomberg | Getty Images
MILAN, Italy — European policymakers have longed for bigger banks across the continent.
And Italy might be about to give them their wish with a bumper round of M&A, according to analysts.
Years after a sovereign debt crisis in the region and a government rescue for Banca Monte dei Paschi (BMPS) that saved it from collapse, many are looking at Italy’s banking sector with fresh eyes.
“If you assess individual banks in Italy, it’s difficult not to believe that something will happen, I would say, over the next 12 months or so,” Antonio Reale, co-head of European banks at Bank of America, told CNBC.
Reale highlighted that BMPS had been rehabilitated and needed re-privatization, he also said UniCredit is now sitting on a “relatively large stack of excess of capital,” and more broadly that the Italian government has a new industrial agenda.
UniCredit, in particular, continues to surprise markets with some stellar quarterly profit beats. It earned 8.6 billion euros last year (up 54% year-on-year), pleasing investors via share buybacks and dividends.
Meanwhile, BMPS, which was saved in 2017 for 4 billion euros, has to eventually be out back into private hands under an agreement with European regulators and the Italian government. Speaking in March, Italy’s Economy Minister Giancarlo Giorgetti said “there is a specific commitment” with the European Commission on the divestment of the government stake on BMPS.
“In general, we see room for consolidation in markets such as Italy, Spain and Germany,” Nicola De Caro, senior vice president at Morningstar, told CNBC via email, adding that “domestic consolidation is more likely than European cross-border mergers due to some structural impediments.”
He added that despite recent consolidation in Italian banking, involving Intesa-Ubi, BPER-Carige and Banco-Bpm, “there is still a significant number of banks and fragmentation at the medium sized level.”
“UniCredit, BMPS and some medium sized banks are likely to play a role in the potential future consolidation of the banking sector in Italy,” De Caro added.
Speaking to CNBC in July, UniCredit CEO Andrea Orcel indicated that at current prices, he did not see any potential for deals in Italy, but said he is open to that possibility if market conditions were to change.
“In spite our performance, we still trade at a discount to the sector […] so if I were to do those acquisitions, I would need to go to my shareholders and say this is strategic, but actually I am going to dilute your returns and I am not going to do that,” he said.
“But if it changes, we are here,” he added.
Paola Sabbione, an analyst at Barclays, believes there would be a high bar for Italian banking M&A if it does occur.
“Monte dei Paschi is looking for a partner, UniCredit is looking for possible targets. Hence from these banks, in theory several combinations could arise. However, no bank is in urgent need,” she told CNBC via email.
European officials have been making more and more comments about the need for bigger banks. French President Emmanuel Macron, for example, said in May in an interview with Bloomberg that Europe’s banking sector needs greater consolidation. However, there’s still some skepticism about supposed mega deals. In Spain, for instance, the government opposed BBVA’s bid for Sabadell in May.
“Europe needs bigger, stronger and more profitable banks. That’s undeniable,” Reale from Bank of America said, adding that there are differences between Spain and Italy.
“Spain has come a long way. We’ve seen a big wave of consolidation happen[ing] right after the Global Financial Crisis and continued in recent years, with a number of excess capacity that’s exited the market one way or the other. Italy is a lot more fragmented in terms of banking markets,” he added.
Deutsche Bank on Wednesday snapped a 15-quarter profit streak with a narrower-than-expected loss, as it made a provision for an ongoing lawsuit over its Postbank division and confirmed it would not make a second share buyback this year.
Shares provisionally ended the session down more than 8%, despite analysts characterizing the results as broadly solid.
Deutsche Bank share price.
Net loss attributable to shareholders was 143 million euros ($155.1 million), against an LSEG poll of analysts which had predicted a loss of 145 million euros.
Germany’s biggest bank had previously flagged it would take a hit in the quarter on the back of the Postbank provision, which it confirmed Wednesday would amount to 1.3 billion euros. The long-running lawsuit by investors alleges Deutsche Bank underpaid to take over the retail banking giant in 2010.
The bank said it remained on track with its distribution commitment to shareholders, which it has previously stated is for a sum in excess of 8 billion euros in share buybacks across the 2021-2025 financial year period.
“On the share repurchase side…unfortunately, prudently we had to step back from the idea of a second repurchase this year, what our focus is now is building excess capital through the back of the year,” Chief Financial Officer James von Moltke told CNBC’s Caroline Roth in a Wednesday interview.
The lender reported net revenue was up 2% to 7.6 billion euros in the second quarter, while efficiency savings reached 1.5 billion euros.
Revenue reports varied across the business. At its investment bank division, a recent area of strength, they jumped 10% year-on-year to 2.6 billion euros — but fell 3% to 2.1 billion euros in fixed income and currencies. Revenue in corporate banking was nearly flat at 1.9 billion euros.
Other highlights included:
Profit before tax excluding the Postbank provision was 1.7 billion euros, up from 1.4 billion euros in the second quarter of 2023.
Provision for credit losses was 476 million euros, up from 401 million euros a year ago.
CET 1 capital ratio, a measure of bank solvency, nudged up to 13.5% from 13.4% in the first quarter of the year.
In a Wednesday note, Citi analysts called it a “solid quarter,” with some divisions above consensus, net interest margins fading at a slower pace than initially expected and a largely-unchanged outlook for 2024 and 2025.
RBC analysts labelled the results “good,” particularly in investment banking, but said loan losses were higher than expected.
Deutsche Bank’s Von Moltke told CNBC he saw several positive drivers for the second half, including in net interest income — which fell 2% in corporate banking the second quarter, according to the Wednesday earnings.
“We had called earlier this year on the net interest income side for a downdraft relative to [20]23, we actually think the banking book segments may be stable, essentially flat to last year, and that’s actually very encouraging, reflecting lower funding costs, better spreads on both the deposit and the loan side. Still more sluggish loan growth than we’d like to see, but overall an encouraging picture,” Von Moltke said.
“On the financial market and corporate finance side, we see the momentum there coming through that we’d hoped to see,” he added, pointing to revenue doubling in its origination and advisory business year-on-year.
The second-quarter result maintains a recent trend of earnings beats for the lender. Back in April, the bank posted 10% higher profit, logging its best quarterly result for the metric since 2013.
A logo on the UniCredit SpA headquarters in Milan, Italy, on Saturday Jan. 22, 2022.
Bloomberg | Getty Images
Shares of Italian bank UniCredit hit their highest level since 2015 on Monday, after announcing that it would return 8.6 billion euros ($9.2 billion) to investors on the back of higher-than-expected profits.
The Milan-based bank shared details of the planned payout after reporting fourth-quarter profits of 1.9 billion euros, almost three times analysts’ expectations.
Shares of the stock were up 10% by 11 a.m. London time.
The payout, which will be delivered through a combination of buybacks and dividends, follows a strong year for the bank, which has been buoyed by higher interest rates.
The bank added that it would adopt a 90% payout policy from this year. UniCredit’s “stated” net income in the October-December period came in at 2.8 billion euros, more than double a 1.2 billion euro ($1.3 billion) average analyst consensus forecast provided by the bank.
Revenues also surpassed expectations, while UniCredit booked lower than forecast costs and provisions against loan losses.
Italy’s second-largest lender has tripled its value since Chief Executive Andrea Orcel took the reins in 2021, leading gains among European banks.
Wefox, the $4.5 billion German insurance technology group, has raised $55 million of fresh funding from Deutsche Bank and UniCredit, two anonymous sources familiar with the deal told CNBC.
The company, which sells insurance plans via an online platform, raised the fresh cash in a debt financing deal from the two European lenders, according to the sources, who were not authorized to disclose the information publicly.
The deal was structured as a convertible debt agreement, meaning that the debt will be converted into equity when Wefox next raises cash, the sources told CNBC.
The fresh funding follows on from a $55 million debt round Wefox raised from JPMorgan and Barclays and a $55 million internal fundraise earlier this year.
As Wefox didn’t raise equity, its valuation remains unchanged at $4.5 billion.
It brings the total amount of funding Wefox has raised so far this year to $160 million and marks a vote of confidence at a time when the insurtech industry faces a grim macroeconomic environment.
The funds will be used to help eight-year-old Wefox accelerate its global expansion plans and double down on mergers and acquisitions, according to the sources.
Unlike other insurtech platforms like Lemonade in the U.S. or Getsafe in Germany, which offer insurance directly to consumers without involving brokers, Wefox works with a network of brokers, both in-house and externally, who distribute its insurance products.
Wefox is also pushing into a new model of selling insurance called “affinity” distribution. This is where the company sells its insurance software to other businesses for a subscription fee — for example, an online car dealer adding car insurance at the point of sale.
Wefox is backed by some of the best-known names in venture capital, as well as large institutional names in the traditional financial world.
Its VC backers include Salesforce Ventures, Target Global, Seedcamp, Speedinvest, and Horizon Ventures, while UBS, Goldman Sachs, Mubadala Capital Ventures, Jupiter Asset Management are also existing investors.
Wefox is also investing heavily in artificial intelligence, which has become a hot area of tech recently following the rise of viral AI chatbot ChatGPT.
Wefox mainly uses AI to automate policy applications and customer service. The company has three tech hubs in Paris, Barcelona, and Milan dedicated to AI.
Credit Suisse on Thursday announced that it will delay the publication of its 2022 annual report.
Stefan Wermuth | Bloomberg | Getty Images
Shares of embattled bank Credit Suisse on Wednesday hit another all-time low for a second consecutive session, dropping by more than 21% shortly before being halted from trade.
Credit Suisse’s largest investor, Saudi National Bank, said it could not provide the Swiss bank with any further financial assistance, according to a Reuters report.
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“We cannot because we would go above 10%. It’s a regulatory issue,” Saudi National Bank Chairman Ammar Al Khudairy told Reuters Wednesday.
Several Italian banks were also subject to automatic trading stoppages after sharp declines, including UniCredit, Finecobank and Monte Dei Paschi.
The SEC conversation related to a “technical assessment of previously disclosed revisions to the consolidated cash flow statements in the years ended December 31, 2020, and 2019, as well as related controls.”
A pedestrian wearing a protective face mask walks in front of a UniCredit SpA bank branch in Milan, Italy, on Thursday, Sept. 3, 2020.
Camilla Cerea | Bloomberg | Getty Images
Recent data points suggest the euro zone may defy the odds and avoid a recession, according to Andrea Orcel, CEO of Italian bank UniCredit.
Euro zone headline inflation came in at 9.2% year-on-year in December, marking a second consecutive month of decline from October’s record high of 10.7%, but remaining well above the European Central Bank‘s 2% target.
Soaring food and energy costs in the wake of Russia’s invasion of Ukraine in February 2022 exerted immense pressure on the euro zone economy and prompted the ECB to embark on a series of steep interest rate hikes in the hope of getting inflation under control.
However, a mild winter has reduced the risk of a gas shortage and softened energy prices, while consumer confidence and business expectations across the 20-member currency bloc have improved in recent months.
Meanwhile Germany, Europe’s largest economy, stagnated rather than contracting as widely expected in the fourth quarter.
“Our view was a mild recession for this year but since then if we look at all the indicators we see, we probably see risk on the upside, so we’re looking at something that could even be no recession,” Orcel told CNBC at the World Economic Forum in Davos, Switzerland.
He added that there are still “significant risks” to the groundswell of cautious optimism.
“We don’t really know how the war is mapping out, there is always a lag in the impact from raising rates and so we don’t really know exactly how the rapid rate rise will impact the economy and there is probably one of the biggest shifts in value chains and in geopolitics that we have seen since World War II,” he said.
The ECB is expected to implement another 50 basis point hike to interest rates, taking its key rate from 2% to 2.5%. ECB board member and Bank of Portugal Governor Mario Centeno told CNBC on Tuesday that “at least” a few more rate hikes will be on the cards in 2023.
Orcel acknowledged that the ECB has a “very difficult job” as it looks to tackle inflation by raising rates, which some economists caution will further hurt growth.
“Europe has a different kind of inflation from the one in the U.S., it is mostly supply driven on energy, on food, and therefore what they’re trying to do to tackle inflation is to jam down the rest of the demand but obviously that has a disproportionate impact on, let’s call it, the economy away from those commodities,” Orcel said.
“Given the lag effect and everything else and the fact that the European economy is quite sticky and then gives, we were concerned that if you tighten substantially above 2%, it could have undesirable effects later.”
