Enhanced Interim Financial Report for Commerzbank Raises Earnings Forecast
In a strategic battle that has been ongoing since September, Commerzbank finds itself engaged in a defensive battle against Italian banking giant UniCredit. Despite expectations of a more significant drop in Commerzbank's profits due to these costs and falling interest rates, the German bank has managed to hold its ground.
UniCredit, with a current stake of around 20%, has been increasing its stake in Commerzbank, aiming to strengthen its influence without crossing the 29.9% threshold that would trigger a full takeover bid. The Italian bank has used the tactic of converting derivatives to shares to exert pressure, but Commerzbank's management has been resistant to the merger.
Commerzbank's leadership, under the helm of CEO Bettina Orlopp, has publicly stated that UniCredit is "not an ideal shareholder" due to the direct competition between the two banks in Germany. Orlopp has also employed a strategy to deter shareholders from potentially selling their shares to UniCredit by offering higher dividends.
The German government, holding a 12.1% stake in Commerzbank, opposes UniCredit's aggressive stake-building, viewing it as a "hostile attack." The government insists that any merger must be coordinated with Commerzbank's management.
The viability of the proposed merger heavily depends on the upcoming antitrust review and compliance with ECB prudential rules, expected around July 2025. These regulatory hurdles present significant challenges for any full consolidation.
Despite the ongoing standoff, Commerzbank has shown confidence in its standalone prospects. The bank has raised its 2025 profit target to around 2.5 billion euros, signalling a strong commitment to its independent growth and transformation strategy focused on profitability and shareholder returns.
However, Commerzbank has not provided any information about its profit expectations for the remaining quarters of 2021 or future years. The leadership of Commerzbank, along with the works council and the federal government, are resisting UniCredit's advances.
In the second quarter of 2021, Commerzbank reported a profit of 462 million euros, a 14% drop compared to the same quarter last year. This decrease was due to one-off costs of almost half a billion euros for job reductions.
Despite the challenges, Commerzbank CEO Bettina Orlopp is setting higher profit targets for the coming years. The bank announced this increase in Frankfurt.
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- UniCredit's ongoing increase in its stake in Commerzbank, along with the Italian bank's tactic of converting derivatives to shares, is aimed at strengthening its influence within the finance industry, potentially leading to a full takeover bid in the business sector.
- Despite the strategic battle with UniCredit, Commerzbank remains optimistic about its standalone prospects in the industry, raising its 2025 profit target to around 2.5 billion euros, focusing on profitability and shareholder returns within the business sphere.
