Germany is Blocking UniCredit’s Purchase of Commerzbank. Should it?

UniCredit has gradually increased its stake to 26% in Germany’s second largest Bank, Commerzbank. The German Government holds a 12% stake and won’t sell. Mr. Fitschen will argue as the Bull, while Mr. Saalfeld will take the Contrarian.

Why a takeover of Commerzbank by UniCredit makes sense?

A look at the European financial market, and in particular the banking market, in comparison

to the United States reveals a clear imbalance. European banks are relatively small by

international standards. While the ten largest US banks together have a market capitalisation of around six trillion US dollars, the ten largest European institutions together only reach around 514 billion euros.

These differences in size have a direct impact on the competitiveness of the European

financial sector. However, the problem extends far beyond the banking sector, as Europe

faces enormous investment needs in the areas of energy infrastructure, innovation and

defence. According to estimates by former European Central Bank President Mario Draghi,

additional loans of around €750 to €800 billion are needed annually. This means that the

productivity and growth of the entire continent depend crucially on the ability to finance these investments.

This poses a structural problem for the financial system. It is highly fragmented, as capital

markets and banks are largely organised at national level and lending is regulated by the

respective Member States. As a result, banks lack incentives to expand across national borders or engage in cross-border mergers, even though this is precisely what is needed to

keep pace with US competitors and support economic growth in Europe more effectively. A

merger between two large banks from two of Europe's most important industrial nations

would therefore be a significant and appropriate step in this direction.

UniCredit as the acquirer

A closer look at the institutions involved highlights the potential of such a transaction. On the

potential buyer side is Italy's largest bank, UniCredit. Under the leadership of Andrea Orcel,

UniCredit has developed into a highly profitable financial institution with a strong capital

base. With a capital ratio of around 16.2 per cent, it has the highest value among the major

European banks and is therefore in a good financial position to make an acquisition.Through its subsidiary HypoVereinsbank, the major Italian bank currently has a strong

market position in Germany, particularly in the federal states of Bavaria and Hamburg. While

HVB is better positioned in investment banking, its presence in the SME sector has been

limited to date.

Commerzbank as a takeover target

Commerzbank is Germany's second-largest private bank and is considered one of the most

important partners for small and medium-sized enterprises. It has close ties to domestic

industry and a broad network in corporate banking. Through its international subsidiaries,

particularly in Poland, a takeover could further expand UniCredit's geographical influence in

Europe.

At the same time, many economists view the German banking landscape as overly

fragmented. Germany is home to almost half of all credit institutions in the eurozone, which

is considered disproportionate given the country's economic importance. Consolidation could therefore lead to greater efficiency, stability and competitiveness.

A takeover could also be beneficial for Commerzbank itself in the long term. The bank is

considered a crisis-ridden financial institution: during the financial crisis of 2008/09, the

government had to rescue the bank by becoming its largest shareholder and providing silent participations and guarantees worth billions to ensure its solvency. The fact that the bank remains partially state-owned 16 years later demonstrates the company's continuing

weakness. A takeover by the highly profitable and successful UniCredit could therefore

significantly strengthen Commerzbank.

Synergies and the need for adjustments

The merger would allow both institutions to combine their strengths and create synergies in

corporate banking and investment banking. At the same time, it would increase the efficiency of the highly fragmented German banking market. Although cost savings would result in a considerable number of job losses within Commerzbank, Andrea Orcel emphasises that the bank would be unable to avoid such job cuts even if it remained independent. Commerzbank has a significant cost-income ratio, which means that its expenses are significantly higher than those of other large European financial institutions. With such figures, job cuts would be almost inevitable sooner or later.

Political and strategic significance

Such a merger would also send a political signal. It could serve as an impetus for the

European banking union that has been called for for years and trigger a new wave of

mergers in the European financial sector. This would make it not only a strategic move for

UniCredit, but also a significant contribution to a more integrated European banking system.

Germany should let UniCredit takeover

Overall, it is clear that a takeover of Commerzbank by UniCredit would be plausible and

advantageous from both a strategic and economic perspective. It would strengthen the

competitiveness of both institutions, create synergies in corporate banking and investmentbanking, and increase the efficiency of the highly fragmented German banking market. At the same time, such a merger could serve as a signal for greater European banking integration and promote the stability and innovative strength of the European financial system in the long term. For Commerzbank itself, the takeover would offer the opportunity to optimise its cost structure and consolidate its position in international competition in the long term. Such a transaction would therefore not only be a business move, but also a significant impetus for the further development of the European banking sector.

The Contrarian

They are not wrong to block it.

The vision of a “Bank of Europe” to rival U.S. financial giants is persuasive. Large banks

reduce systemic risk, cut compliance costs, and can fund capital-intensive ventures. This

logic enjoys wide support among European policymakers. And yet Berlin, holding a 12% stake in Commerzbank, has drawn a clear line. Why?

The official reason is national interest: protecting the independence of Germany’s

second-largest bank from foreign control. Commerzbank is the primary lender to the

Mittelstand (or as UniCredit recently misspelled it,

“Mittlestand”) the famously resilient backbone of German industry, composed of small and medium-sized, often family-owned firms.

This is a conservative, relationship-based form of banking, and Commerzbank commands roughly 10% of that market. Many fear that placing this delicate ecosystem under foreign control could distort its focus and priorities. In fact, a recent customer survey conducted by Commerzbank found that 70% of respondents considered its independence important.

These cultural and strategic concerns may appear less compelling than UniCredit’s

projected financial synergies. However, they point to a deeper issue UniCredit has yet to

address.

If you want a European Bank, build a European Bank

Much of the resistance to UniCredit’s advances is rooted in history. As mentioned, UniCredit

already owns a German bank, HypoVereinsbank (HVB), acquired in 2005 with the help of a

certain Andrea Orcel, then-Merrill Lynch investment banker. What critics say wrong went with

that deal sheds light on why Germany and Commerzbank are wary today.

Though the takeover was mostly friendly, many now regard it as naive. As one former HVB

manager put it: “We thought we knew Italians from vacations, they’re nice people.” That

sentiment soon faded. HVB effectively became “the sales department for UniCredit,” a shift

largely due to its own precarious financial position. Nonetheless, UniCredit’s aggressive

cost-cutting left deep scars, scars that influence current attitudes toward a Commerzbank

acquisition.

These concerns may not be as concrete as UniCredit’s financial arguments, but they are

precisely what’s stalling the deal. Cultural friction, especially given the sensitive role of theGerman risk-averse Mittelstand, risks derailing the entire transaction. It’s worth noting that

German corporate law grants employees a special role in corporate governance, including

participation in board votes.

During UniCredit’s acquisition of HypoVereinsbank, for instance, the employee representatives on the board actually voted in favor of the deal. Yet this tradition of transparency and consent makes UniCredit’s recent tactics all the more controversial. UniCredit’s covert accumulation of options to mask its stake has only deepened mistrust. A spokesperson for the German Finance Ministry recently called the further increase of the stake “once again uncoordinated and unfriendly.” In response, Andrea Orcel has subtly threatened to sell his stake to a non-EU investor.

If this deal is to go through, and there are good arguments for it, UniCredit and Germany

must move beyond opportunism. They must collaborate to build a truly European bank,

rather than simply conquer other European banks.

The proposed takeover of Commerzbank by UniCredit is a focal point of European banking:

the tension between national sovereignty and European integration. On the one hand,

consolidation promises efficiency, competitiveness, and the scale necessary to support

Europe’s economic ambitions, from green infrastructure to technological innovation. On the

other, it exposes persistent national sensitivities, especially in countries like Germany, where

banking remains deeply intertwined with industrial culture and regional identity. The dream of a continental banking champion has been whispered about for decades, yet every time it

nears reality, national reflexes kick in. If Orcel and Berlin can somehow turn this tug-of-war

into cooperation, they might finally give Europe the financial heft it’s been missing. If not,

UniCredit’s gambit will fade into the long list of European what-ifs.