(Bloomberg) -- UniCredit SpA Chief Executive Officer Andrea Orcel signaled he has all the time in the world to win over stakeholders for his idea to acquire Commerzbank AG.
“It’s a long process,” Orcel said in an interview. “We want to have the opportunity to convince all key stakeholders, including the government, that a possible combination creates value.”
Third-quarter results published Wednesday underscored the Italian lender’s position of strength, with shares of UniCredit rallying as much as 3.1% after Orcel lifted his guidance for full-year profit. Commerzbank, meanwhile, fell as much as 4.6% as surging credit provisions showed the challenges for a lender that’s heavily dependent on the German economy.
While both companies beat profit estimates in the quarter, the diverging reaction shows the challenges for Commerzbank CEO Bettina Orlopp, who is trying to persuade investors that her firm is better off as an independent bank. She has increased profitability and payout targets, and promised to provide more details at an investor day in February on how she wants to get there and beyond.
Shares of Commerzbank extended losses and UniCredit gave up gains after Orcel said it may take as much as a year to decide what to do with the investment in the German lender.
“There will need to be discussions with all the stakeholders before we move any further,” he said on a call. The “timeline is by definition longer than many people have been considering, but has a limit at some point, given that we cannot be invested forever without taking a decision of in or out.”
Orlopp said on a call with journalists that UniCredit, as the German bank’s largest investor, has requested a new meeting, which would be the second with her as CEO.
Commerzbank confirmed a Bloomberg report that Orlopp is working on a plan to free up even more capital for payouts and investments, by curtailing growth in risk-weighted assets further. She wants to achieve that partly by using more significant risk transfers and potentially backing away from some low-yielding clients, people familiar with the matter have said.
UniCredit’s approach is “not what you usually would expect if you really want to do it in a friendly way,” Orlopp said on Bloomberg TV. She said she will “focus on our own strategy, which is very successful,” while waiting for UniCredit to make up its mind if it wants to launch a takeover bid.
Orlopp, who was appointed CEO shortly after UniCredit first unveiled a major stake in September, has been openly skeptical regarding the benefits of a potential tie-up. She has warned a takeover could result in client attrition. Germany’s government has also signaled its opposition.
UniCredit on Wednesday sought to push back, saying its existing operations in Germany are “highly complementary” with Commerzbank and a combination would pose “low risks of concentration.” The deal could also result in better service levels, it said.
Orcel lifted a guidance for UniCredit’s full-year profit to more than €9 billion and vowed to keep it above that level through the next two years. The Milan, Italy-based lender said it will return more money to shareholders in 2025 and 2026 than this year.
Commerzbank lifted the outlook for net interest income this year, while lowering it slightly for next year. Credit provisions in the third quarter almost tripled from a year earlier, overshadowing plans for a new share buyback tranche.
Orcel said in the interview that UniCredit may ultimately decide to sell its holding in Commerzbank at a profit if a deal doesn’t work out.
--With assistance from Anna Edwards.
(Updates shares from third paragraph, adds Orcel comment on timing of decision in sixth.)
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