Commercial Bank finds itself engulfed in a dispute
Headline: Commerzbank's Daring Moves to Foil Unicredit's Takeover Bid and Transform into a Growth Powerhouse
Commerzbank CEO Bettina Orlopp maintained a diplomatic stance regarding Unicredit's potential takeover bid during the bank's press conference. Orlopp emphasized that she's open to all possibilities, but no concrete proposal has been presented as yet. While her stance appears reasonable, it hides a grittier reality. In fact, Orlopp is vigilantly safeguarding Commerzbank's interests against an apparent disadvantageous takeover scenario.
"Unicredit and Commerzbank have different starting points. Unicredit holds a substantial stake, almost securing 30 percent of the shares," Orlopp asserted, alluding to Unicredit's 9.5 percent current stake and additional 18.5 percent options[1][3].
Determined to protect every shareholder, Orlopp assured that investors have easy access to Commerzbank. Ultimately, the German market would decide Unicredit's bid. While the German government, as the top shareholder (12%), openly supports Commerzbank, Unicredit could independently secure sufficient shares, defying the government's stance. Consequently, all shareholders need to back the bank together.
To win favor, Orlopp announced a dividend yield hike, ascending from 2.7% to 3.4%. This increase necessitates distributing the entire net profit following interest payments on specific bonds but prior to restructuring costs[1]. With a solid equity ratio beating the legally required 13.5%, Commerzbank can afford the dividend hike and subsequent acquisitions, transformation, and new hires[2].
The target price-to-book ratio lies at 1. Currently at 0.75, Commerzbank aims to lift the price to approximately 23 euros. This surge would generate profits for shareholders and fortify Commerzbank's position against Unicredit's takeover attempt.
Commerzbank's defensive measures extend beyond dividend hikes. Targeted job cuts would eventually see 4,000 positions disappear[3]. Simultaneously, Commerzbank's recruitment drive will bring in tech-savvy personnel to fuel digital transformation. These changes aim to offset declining interest income through provision revenues and higher fees, such as from fund businesses and enhanced bank account fees[2].
Dynamic figures underscore Commerzbank's prowess: Its key figure, the return on equity, has jumped significantly, exceeding 9%. Cost-income ratio saw a 59% drop, indicating enhanced profitability[2]. Commerzbank's ambition is to surpass major European banks, becoming too large for likely takeover bids[1].
This text was first published on capital.de
Insights (Enrichment Data): Commerzbank's defenses against a potential Unicredit takeover involve several strategic moves:
- Job Cuts and Cost Reduction: Commerzbank intends to slash up to 4,000 jobs, streamlining operations and gaining a competitive edge.
- Strategic Growth Plan: Commerzbank introduced the "Momentum" strategy, which sets ambitious growth and financial targets, like an RoTE of 15% by 2028[2].
- Digitalization and Expansion: Commerzbank focuses on bolstering digital distribution channels, solidifying its Mittelstand lead, and strengthening two-brand strategy[2].
- Acquisitions and Partnerships: The bank aims to boost growth through acquisitions and strategic partnerships, particularly in product development, distribution, and IT services.[5]
- Capital Return and Profitability: Commerzbank plans to increase capital returns, targeting a 100% payout ratio of net results after restructuring charges and AT 1 coupon payments from 2025[2].
- Political and Regulatory Defense: Receiving support from the German government and political and regulatory opposition act as defensive tools to safeguard Commerzbank's independence.[1]
By adopting these tactics, Commerzbank effectively positions itself to operate independently and thrive, thereby deterring a potential Unicredit takeover.
- Commerzbank's strategic restructuring efforts, including job cuts and cost reduction, aim to enhance profitability and potentially enable a higher dividend payout of 3.4%, as announced by CEO Bettina Orlopp.
- Commerzbank's CEO, Bettina Orlopp, mentioned during the press conference that the bank is open to all possibilities, but the current takeover bid from Unicredit hasn't presented a concrete proposal, emphasizing the bank's vigilance to protect its interests.
- To counteract Unicredit's potential takeover attempt, Commerzbank is focusing on digital transformation, recruiting tech-savvy personnel, and implementing targeted job cuts to reduce costs, as part of its comprehensive defensive strategy.
