UniCredit CEO pushes merger credentials as it outperforms Commerzbank

MILAN (Reuters) – UniCredit CEO Andrea Orcel said on Wednesday banks need to be more efficient and profitable and expressed confidence that “people will look at the facts” when weighing up a potential deal with Commerzbank (ETR:CBKG).

In beating expectations with its third-quarter earnings and improving the profit outlook, UniCredit said in presentation slides its German business yielded a return of 21.5% on the capital allocated to it, against 10.2% at Commerzbank when excluding its Polish unit.

UniCredit’s interest in its German rival has sparked protests from Germany’s government which has said it supports the independent strategy of the country’s second-biggest bank.

Germany’s Commerzbank also raised some financial targets on Wednesday and said its plan for growth was working.

In an interview with CNBC television, Orcel said banks needed to withstand competition from unregulated non-banking rivals and remain an attractive proposition for investors, and everyone would have to take responsibility if UniCredit had to walk away from a deal.

“There are tensions but I am quite optimistic,” Orcel said.

“I think that beyond what is happening today, people will look at the facts and the facts are actually quite positive for Germany, the European Union and I’d say that they are quite positive for Commerzbank too.”

UniCredit said its German business is a “mirror image” of Commerzbank and the better performance of UniCredit Germany in recent years is proof of what could be achieved if it were allowed to combine with Commerzbank.

UniCredit said in the slides that current trends in the banking industry meant that “difficult decisions” would be necessary if a merger went ahead, however the group has a good record in managing staff reductions in accordance with unions.

Orcel reiterated that UniCredit would only pursue a Commerzbank deal if it did not hurt returns for its shareholders, and had prepared the ground to also be able to just sell its Commerzbank stake at a profit.

“But then everybody will need to take their own responsibility and accountability for what’s next. We’re very, very confident that for us what’s next is a positive thing.”