UniCredit eyes bid for Commerzbank if Deutsche talks fail - sources

Reuters
FILE PHOTO: UniCredit bank logo is seen on a banner downtown Milan, Italy, May 23, 2016. REUTERS/Stefano Rellandini/File Photo

By John O'Donnell and Tom Sims

FRANKFURT (Reuters) - Deutsche Bank (DBKGn.DE) came under increased pressure on Thursday to move forward on a tie-up with Commerzbank (CBKG.DE) after Italy's UniCredit (CRDI.MI) was named as a potential alternative bidder for the German lender.

UniCredit could explore a merger with Commerzbank if talks with Deutsche fall through, two people with knowledge of the matter said on Thursday.

The people said UniCredit would not crash the talks on a tie-up between Germany's two largest banks and UniCredit's focus for now was on its turnaround plan.

Deutsche and Commerzbank announced talks on March 17 and two people with knowledge of the matter said on Thursday they were proceeding well but "very carefully".

UniCredit's interest may now spur an acceleration.

Deutsche Bank's exploratory discussions with state-backed Commerzbank come after prodding by Germany's finance ministry, which is worried about the future of the country's biggest bank.

But a potential merger between the two has met stiff resistance from labour unions fearing jobs cuts, and some major investors.

Lawmakers are also warning Germany's finance minister they will block any attempt to invest public money in a merged Deutsche and Commerzbank, a deal which could require up to 10 billion euros ($11.2 billion) of fresh capital.

Deutsche and Commerzbank have been divided over the pace of their talks, two people with knowledge of the matter said. Commerzbank would like to see a speedy decision on whether to deepen the discussions, while Deutsche Bank is playing for time.

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A deal would see Berlin become a shareholder in the combined group, which one German official said will need an injection of fresh capital because of restructuring costs and the fact that losses on investments could be triggered by a tie-up.

The Financial Times first reported UniCredit's interest on Thursday. UniCredit, Commerzbank and Deutsche Bank all declined to comment on the report.

If the Italian lender were to act, it would likely see Commerzbank remaining listed but fused with UniCredit's German bank, HypoVereinsbank, one of the people said.

Shares in Commerzbank were up 3.2 percent by 0742 GMT, while Deutsche Bank stock was down 2.0 percent. Unicredit shares were down 1.2 percent.

Any combination with UniCredit would be based in Germany while UniCredit would maintain its headquarters and listing in Milan. Reuters reported in 2017 that UniCredit had told Berlin it was interested in eventually merging with Commerzbank.

The FT reported that one of the parties might decide to walk away from the talks, adding a significant announcement could be made as early as this weekend, citing people briefed on the discussions.

Through its stake in Commerzbank, the German government would play a central role in any fusion, and lawmakers fear this puts it on the hook to shoulder losses if the bank runs into trouble.

Berlin could therefore pull the plug if it believes a deal would be politically or financially unpalatable.

(Additional reporting by Gaurika Juneja in Bengaluru, Andreas Framke, Christoph Steitz and Hans Seidenstuecker in Frankfurt, and Gianluca Semeraro in Milan; Editing by Gopakumar Warrier and David Holmes)