Commerzbank to carry first assembly with UniCredit on Friday | USAEMALL.com

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Commerzbank will “exchange views” with UniCredit in a first meeting on Friday, incoming chief executive Bettina Orlopp told investors, as the German lender attempted to woo them with promises to lift profits and payouts to shareholders more than previously expected.

Orlopp, who was this week named as the bank’s next chief executive in the wake of aggressive stakebuilding by the Italian lender, told investors on Thursday that “UniCredit is now a shareholder and it is very normal that you exchange views”.

Shares in Commerzbank surged more than 5 per cent in morning trading to €16.19, their highest level in more than a decade.

Despite the stock gaining close to 30 per cent since UniCredit first disclosed a stake two weeks ago, Orlopp insisted on Thursday that “there’s lots of upside potential in our share price”.

As Germany’s second-largest listed gears up for discussions with its bigger rival, it unveiled more ambitious growth and profit targets, as it seeks to make the case for its independence.

The bank’s chair, Jens Weidmann, said in a statement: “Commerzbank is continuously expanding its independent position as a strong pillar in the German banking market.”

UniCredit has sent shockwaves through the German establishment by rapidly building a 21 per cent stake in Commerzbank — subject to approval from the European Central Bank for the latest holdings — with a chunk of its shares bought from the German government.

The Italian bank’s manoeuvres have left both Commerzbank and German politicians on the back foot. The German government still owns a 12 per cent stake in the lender, and a potential takeover by UniCredit is extremely politically sensitive.

Both Chancellor Olaf Scholz and finance minister Christian Lindner have in recent days criticised the stealthy way UniCredit emerged as Commerzbank’s largest shareholder and put the German bank in play.

Weidmann, a former Bundesbank president, described the lender as “Bank for Germany”. Top politicians and senior union officials have lashed out against selling the lender “to the Italians”.

UniCredit’s chief executive Andrea Orcel, who has been eyeing the German rival as a potential takeover candidate for years, said on Wednesday that full integration was one of several options as UniCredit could also remain a financial investor or sell down its stake again.

Commerzbank’s updates to its medium-term strategy on Thursday said the bank could accelerate revenue growth faster than envisaged a year ago, and that its risk-weighted assets would be lower than previously expected.

Revenues, which stand at about €12bn this year, are now expected to rise to €13.3bn, compared with previous guidance of €12.5bn by 2027. Despite expecting to do more business, the bank says its risk-weighted assets will only stand at €189bn in 2027, compared with its previous estimate of €196bn. In banking, more business activity typically leads to higher, not lower, risk-weighted assets.

Commerzbank expected to receive regulatory approval for the next €600mn tranche of its share buyback plan next month, Orlopp said at the conference, with the repurchase starting “right after that”. The bank was also likely to seek approval for another €400mn of purchases after reporting third-quarter results in early November, she said.

By 2027, Commerzbank now expects to lift its return on tangible equity to more than 12 per cent, up from its previous target of 11 to 11.5 per cent and compared with a return of 8.9 per cent in the first half of this year.

It said it was planning to pay out “more than 90 per cent” of its earnings to shareholders for the years 2025 to 2027, compared with its previous target of more than 80 per cent.

Dividends and payouts are contingent on approval from its top regulator the ECB and the German government as a key shareholder.

The bank also forecast that net profit would rise to “over €3bn in 2027” compared with €2.2bn in 2023, although analysts on average already expect net profits to increase to €3.1bn in 2027.

Orlopp said that annual payouts to shareholders could rise to €2.7bn by 2027 if the bank meets its earnings targets. “We can all do the math . . . [If] you put that in perspective to our current market capitalisation [of around €18bn], it is a very, very good deal.”