Commerzbank, UniCredit shares extend gains as Orcel lays out plans

MILAN (Reuters) – Commerzbank (ETR:) and UniCredit shares extended gains on Thursday after the Italian bank’s CEO Andrea Orcel laid out plans to buy more of its German rival or even take it over, fuelling speculation about further dealmaking in the region.

By 0845 GMT shares in Commerzbank were up 2.6%, rising further after Orcel told Bloomberg TV that on the right terms he was interested in buying the remaining 12% of Commerzbank Germany’s government owns, and even a merger. UniCredit also rose 2%.

“We would expect more newsflow on European bank M&A going forward, which could be a positive for valuations for banks that have historically been seen as targets,” analysts at JPMorgan including Kian Abouhossein said in a note to clients on Thursday.

“Banking sector M&A historically has been triggered by momentum from deals being announced.”

Analysts see the boost to UniCredit earnings from a deal that would propel its German business from a regional to a national one, with a strong focus on the country’s small- and medium-sized enterprises.

However, potential political hurdles and the risks stemming from Orcel’s approach.

“We note that any M&A talks could still fail on price, lack of government support, prospects of execution risks in particular on cost savings,” JPMorgan analysts said in a note.

“Also, we do not think that Italy M&A is completely off the table and depending on share price moves, could still represent a potential alternative to Commerzbank acquisition,” they added.

Orcel said in the interview on Thursday that his bank may increase or cut its holding in Commerzbank or it may seek to combine the two.

Europe’s banks index was up 1.5% in early trading.