Milan — UniCredit takeover target Commerzbank is unfit to face the banking industry’s future challenges in its current shape, the Italian bank said on Monday, outlining changes it thinks the German lender should make to boost its earnings.
Piling pressure on Commerzbank, which is fighting its advances, UniCredit said its interest had lifted the stock price of Germany’s second-biggest bank above a level that was justified by its performance, offering suggestions on how to improve that even in the absence of any deal.
Under its “Commerzbank Unlocked” plan, Commerzbank would reach a 2028 net profit of around €5.1bn, or €600m higher than the current market consensus of €4.5bn, UniCredit said.
Any upgrade of Commerzbank’s profit target would be on top of that difference because the measures UniCredit is proposing are structural, UniCredit CEO Andrea Orcel told analysts.
“Commerzbank risks becoming increasingly unfit for a banking environment that is changing rapidly,” Orcel said.
‘Rampant bureaucracy’
UniCredit has said given its low bid premium, its stake should not rise much above the 30% level, which Orcel said was confirmed by current indications.
“One scenario is we expect low take-up, we’re happy. Financially, we win, we sit back and probably people will thank us in two years because we may do a transaction better,” he said.
UniCredit said Commerzbank is overly focused on short-term delivery and a restructuring would be inevitable over the longer term.
Orcel added Commerzbank has a “disproportionate amount” of non-staff related costs that his strategy could tackle, based on the revamp UniCredit has already implemented at its local unit HVB.
“Bureaucracy” at Commerzbank is “rampant“, offering room for cost cuts, he said. Most such cuts would target the bank’s international network rather than Germany.
Commerzbank declined to comment. It has previously said it wants to remain independent, a stance backed by the German government.
Read More: UniCredit says Commerzbank is ‘unfit’ for industry challenges
