(Bloomberg) -- UniCredit SpA has demonstrated at its existing German unit that it can cut costs in the country, which bodes well for its potential plans for Commerzbank AG, analysts at KBW wrote in a note.
“Germany is a tough banking market and Commerzbank has a small market share, but we find that HVB, UniCredit’s German unit, has been a success story, despite being even smaller than Commerzbank,” analysts including Hugo Cruz wrote in a note released Tuesday. UniCredit apparently “has a formula that works and so it could make sense to replicate it with another German bank,” they said.
UniCredit last week unveiled a 9% stake in Commerzbank and is set to ask for regulatory permission to build a stake of as much as 30%, Bloomberg has reported. Chief Executive Officer Andrea Orcel said in an interview last week that a full takeover of the German competitor is one of the options he’s considering.
A combination of UniCredit and Commerzbank would create a European banking giant ranking ahead of Germany’s largest bank Deutsche Bank AG in terms of domestic revenue, according to Bloomberg calculations.
Orcel has said he plans to present proposals to the German lender on how to improve its strategy. He indicated in an interview with German newspaper Handelsblatt published on Monday that he would focus job cuts on central group functions.
The influential German labor union Verdi has said UniCredit’s cuts at HVB serve as a cautionary tale, saying it strongly opposes a potential takeover of Commerzbank by the Italian bank.
“We do not need another disaster like the one we saw at HypoVereinsbank,” Stefan Wittmann, a Verdi official who sits on Commerzbank’s board of directors, said last week. “We do not need Italians to come in and wind up traditional German banks.”
--With assistance from James Cone.
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