Shares of Commerzbank and UniCredit experienced declines on Monday following the German government's announcement that it would maintain its 12 percent stake in the German bank for the time being. This decision is expected to keep any potential merger with the Italian lender on hold.
On Friday evening, Germany's Finance Agency stated that the state would not sell any additional shares in Commerzbank at this time, and the bank's strategy is "geared towards independence." This is the clearest indication yet that the government does not support a takeover of the country's second-largest lender.
UniCredit's attempt to merge is the most ambitious pan-European bank merger to date, but it encountered significant political obstacles in Germany, particularly ahead of national elections. Commerzbank shares dropped by 5 percent during late morning trading in Frankfurt, while UniCredit stock fell by 1.6 percent in Milan.
Commerzbank's shares had risen by approximately 24 percent since September 11, the day UniCredit announced it had acquired a 9 percent stake in the German bank and expressed interest in a merger. UniCredit shares had increased by 5 percent.
The announcement by the finance agency, which is part of the German finance ministry, suggests that UniCredit is unlikely to make a takeover offer soon, according to some analysts.
UniCredit's unexpected acquisition of Commerzbank shares caught Berlin off guard and sparked opposition from labor unions. This prompted Commerzbank to develop a defense strategy, fearing that a merger could result in substantial job losses and hinder lending to small and medium-sized businesses.
Commerzbank, with over 25,000 business customers, nearly a third of German foreign trade payments, and more than 42,000 employees, is a crucial component of the German economy.
The German government, which still holds 12 percent of Commerzbank after selling 4.5 percent of its shares to UniCredit, will play a pivotal role in determining whether any deal can proceed.
Commerzbank is scheduled to hold meetings this week between its management and supervisory boards. The lender is preparing to place the bank's finance chief, Bettina Orlopp, in charge of any discussions with UniCredit, according to Reuters.
