BLOG — Dec 27, 2024
UniCredit and Commerzbank: Exploring the potential M&A transaction
M&A activity has been subdued over the past few years with factors such as economic uncertainty, stricter regulations, and higher interest rates at play. These dynamics have resulted in soaring transaction financing costs, lower stock valuations, and hesitation among many deal makers. Globally, second quarter M&A transactions were flat compared to the first quarter. However, the European M&A showed signs of recovery with mega deals such as that of Abu Dhabi National Oil Company's acquisition of Covestro AG and BBVA’s acquisition of Banco de Sabadell, with transaction values of €14.4B and €12.1, respectively, driving the overall value of transactions.
Towards the end of Q3 came the news of UniCredit accumulating a stake of 9.9% in Commerzbank, sparking speculations of a potential acquisition. UniCredit's CEO Andrea Orcel, a former investment banker, has made it clear that UniCredit is interested in pursuing further M&A opportunities. Since his appointment on 15th April of 2021, there has been a series of transactions. Notable ones include acquisition of minority stake in Greek Lender Alpha Services and Holdings, as well as acquisition of Polish banking services providers Aion and Vodeno. Further helping the case is UniCredit’s high amounts of excess capital that can easily be deployed to achieve inorganic growth through acquisitions.
Commerzbank is no stranger to being a potential acquisition target, which doesn't come as a surprise given that it has traded at a steep discount to its book value. UniCredit’s interest would make sense, especially since it already has an operating subsidiary in Germany, UniCredit Bank GmbH. About 40% of UniCredit's branches in Germany are within 500 meters of Commerzbank branches. The cost synergies achievable through branch closures and right sizing makes for a compelling case.
At the same time, there could be major hurdles, such as stiff opposition from the unions due to potential job losses. Further complicating the matter is the political angle of Germany's second largest bank potentially coming under foreign control. Both UniCredit and Commerzbank are Domestic Systemically Important Banks (D-SIBs). If a transaction does go through, it will be interesting to see the impact on capital requirements, especially due to the resultant increase in asset base and potential complexity of operations.
Read on to gain insights into this potential M&A and how S&P Global Market Intelligence can accelerate your decision making. No matter what type of transaction or phase of the M&A deal lifecycle you're focused on, our transparent, quality data and analytics tools can help you locate targets, gather comps, conduct valuations, and monitor markets.
European banking M&A activity since 2021
M&A activity in the European banking industry has been in a decline in recent years. However, 2024 is showing signs of recovery in terms of transaction value.
Data compiled on October 23, 2024. Includes announced or completed deals between Jan. 1, 2021 and October 23, 2024 where transaction geography and industry classification is Europe and banking respectively, and transaction types are acquisition of whole company (including majority stake) and acquisition of minority stake.
Source: S&P Global Market Intelligence.
Largest European banking M&A deals since 2021
BBVA's announced acquisition of Banco de Sabadell is helping to boost transaction value statistics for 2024, raising hopes for an M&A revival in Europe, particularly within the banking industry.
Data compiled on October 23, 2024. Includes announced or completed deals between Jan. 1, 2021 and October 23, 2024 where transaction geography is Europe and industry classification of target and buyer is banking. Transaction types are acquisition of whole company (including majority stake) and acquisition of minority stake.
Source: S&P Global Market Intelligence.
M&A activity involving UniCredit under Andrea Orcel
UniCredit under Andrea Orcel, since being appointed as CEO on 15th April 2021, has been involved in a series of mergers and acquisitions. Acquisition of Commerzbank could end up being the largest acquisition since his appointment.
Data compiled on October 23, 2024. Includes announced or completed deals involving UniCredit SpA between April 15, 2019 and October 23, 2024. Transaction types are acquisition of whole company (including majority stake) and acquisition of minority stake.
Source: S&P Global Market Intelligence.
German branch analysis of Commerzbank and UniCredit
Commerzbank has 431 branches across Germany while UniCredit has 292 through its German subsidiary, UniCredit Bank GmbH. About 40% of UniCredit branches are within 500 meters of a Commerzbank, which makes for a strong case for cost synergies achieved through branch consolidation.
Data compiled on September 19, 2024.
Analysis includes depository branches.
Source: S&P Global Market Intelligence. All rights reserved. Esri, TomTom, Garmin, FAO, NOAA, USGS.
Competitor analysis of Commerzbank branches within Germany
From a branch footprint perspective, there could be other suitors as well. Commerzbank has 404 branches (67% of total branches) within 500 meters proximity of Deutsche Bank, making it another strong contender for cost synergies achieved through branch consolidation.
Data compiled on October 23, 2024.
If S&P Global Market Intelligence is unable to get the exact latitude and longitude of a given branch, we will assign it to a "centroid" of the center of the street, postal code or city, in that order of preference. For the purposes of this report, S&P Global Market Intelligence will include centroids up to the street level if they are within the indicated distance of the target branch.
S&P Global Market Intelligence may not be able to assign branches to a specific subsidiary, in which case ownership is assigned to the parent holding company. Only includes S&P Global Market Intelligence covered companies for which specific branch location data is available.
Source: S&P Global Market Intelligence.
Unicredit and Commerbank total return since 2021
UniCredit is one of the best-performing European banking stocks in recent years. The bank achieved a total return of 522% since 2021, aided by an emphasis on returning excess capital to shareholders.
Data compiled on 25 October, 2024.
Chart shows total return starting from 01/01/2021 till 10/24/2024.
Source: S&P Global Market Intelligence.
UniCredit and Commerzbank price to tangible book value since 2021
Commerzbank has historically been trading at a steep discount to its tangible book value, a factor that has been contributing towards speculation about being an acquisition target.
Data compiled on 25 October, 2024.
Chart shows price/tangible book value starting from 01/01/2021 till 10/24/2024.
Source: S&P Global Market Intelligence.
Comparison of key metrics of Commerzbank and UniCredit
Commerzbank's financial metrics have been improving, with analyst estimates projecting further progress. However, it lags significantly behind UniCredit, especially on efficiency and profitability.
Data compiled on 25 October, 2024.
Data represents S&P Capital IQ mean estimates as of 25 October, 2024. a=actual; e=estimate. Actual data presented is standardized to match the analysts' methodology and may differ from as-reported financials.
Source: S&P Global Market Intelligence.
Analyzing regulatory capital of Commerzbank, UniCredit and UniCredit Bank
Compared to Commerzbank, both UniCredit and its German subsidiary, UniCredit Bank, maintain higher level of capital ratios against regulatory requirements. It will be interesting to see the impact on capital ratios in the scenario of M&A, especially if merged with UniCredit Bank.
Data compiled on 30 October, 2024 for Q2 2024.
Chart at top represents breakdown of tier 1 common capital ratio (CET1) ratio.
Middle chart represents components of CET1 regulatory requirements.
Bottom chart represents CET 1 ratio cushion as difference between total CET 1 requirement and CET 1 ratio.
Source: S&P Global Market Intelligence.