Commerzbank Stock Doubles Amid UniCredit Merger Push

One year has passed since UniCredit, the Italian bank, initiated discussions with Commerzbank, the German commercial bank, regarding a potential merger. The chief executive officer of UniCredit, Andrea Orcel, has been attempting to overcome resistance from Germany, but this goal remains elusive. Despite the challenges, UniCredit's push for this ambitious merger has prompted significant reforms within Commerzbank.

As UniCredit continues to acquire shares and becomes the largest shareholder of Commerzbank, the latter has undertaken urgent leadership changes, business restructuring, and strategic goal setting to maintain its independence. This has resulted in a substantial increase in Commerzbank's stock price. Andreas Thomae, a corporate governance expert at Deka, one of Commerzbank's major investors, noted that Commerzbank's current state is vastly different from what it was a few years ago.

On September 11, 2022, UniCredit unexpectedly disclosed its acquisition of Commerzbank shares. Orcel subsequently expressed his desire to engage in merger negotiations, which sparked widespread opposition within Germany. This conflict pits the second-largest Italian bank against German authorities, serving as a test of Germany's ability to resist foreign takeovers and the feasibility of cross-border banking transactions in Europe.

Orcel recently addressed bankers at a conference in Frankfurt, stating that while there are currently no discussions, the absence of dialogue does not mean that plans do not exist. He emphasized that UniCredit has a merger plan in place. Regardless of the outcome, it is clear that investors are optimistic about the changes at Commerzbank. Ian Lapey, the portfolio manager of the Gabelli Global Financial Services Fund, highlighted that Commerzbank's "self-improvement plan" has led to better financial performance and a higher stock price. Lapey considers Commerzbank a top stock pick for 2025, noting that Orcel's involvement has pushed Commerzbank to adopt more challenging profitability targets, which is a positive development.

Since UniCredit first expressed its acquisition intentions, Commerzbank's stock price has more than doubled, outperforming UniCredit's 83% stock price increase. However, recent weeks have seen a slight decline in Commerzbank's stock price as analysts have downgraded its rating, suggesting that the benefits of its transformation are already reflected in the current stock price. Shortly after UniCredit began acquiring shares, Commerzbank promoted its chief financial officer, Bettina Orlopp, to the position of chief executive officer. Orlopp introduced a plan to eliminate approximately 3,900 out of 36,700 full-time positions, primarily local jobs, to boost profits and demonstrate Commerzbank's ability to thrive as an independent company.

While many banks have benefited from rising interest rates, Commerzbank's profits continue to grow. However, in terms of profitability and the cost-to-income ratio, Commerzbank still lags behind UniCredit. Under Orcel's leadership, the cost-to-income ratio of UniCredit's German subsidiary, HVB, has decreased from 61% at the end of 2020 to 37%, while Commerzbank's current ratio stands at 56%. Later this month, Commerzbank's management board and supervisory board will hold their annual strategic meeting. Orcel continues to exert pressure, warning that he hopes Commerzbank will accelerate its transformation process.