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It's been 17 years since the last major European cross-border banking deal, so it's only natural that the architects of that deal would lead the next one.
In 2007, Andrea Orcel was a financial institutions banker at Merrill Lynch and an adviser to the hugely ambitious Royal Bank of Scotland on its complex takeover and break-up of the Dutch bank ABN Amro.
Now, having been promoted from CEO adviser to bank CEO, Mr Orsel appears to be gearing up for an equally bold cross-border deal: the acquisition of German rival Commerzbank by his Italian bank UniCredit.
Last week it was revealed that UniCredit had acquired a 9% stake in Germany's second-largest listed bank, following a two-pronged strategy of secretly building a stake partly based on derivatives and then more transparently acquiring a stake sold by the German government (which still holds a 12% stake in Commerzbank as a holdover from its 2008 bailout).
On the surface, the plan seems to have backfired: politicians of all stripes rushed to defend Commerzbank's reputation, embarrassed German government officials spoke of UniCredit's “unfriendly” behavior, and a full-scale merger, which Orsel made no secret of his desire, seems unlikely.
But that would be to underestimate a banker known as much for his sly charm as for his technocratic skills and steely determination. “Very patient” And there is a clear “choice,” as bankers like to say.
At the very least, the Italian bank has a large stake in rival banks that could rise in value.UniCredit's own position has been significantly strengthened by a 65% rise in its shares over the past year on rising profits.Mr. Orsel may also pressure Commerzbank for a similar efficiency drive.
A middle ground between the status quo and a full-blown UniCredit-Comerzbank merger would be the sale of UniCredit's current German branch, HVB, to Commerzbank, which would be more politically palatable and would keep Commerzbank a listed company with UniCredit as the main investor.
In the most ambitious case, Orcel would not only pull off a full-scale merger but would then do a second-stage deal with another European financial institution, perhaps with a larger investment bank like Barclays.
Viewing Commerzbank as a waystation helps explain why anyone, let alone a supposedly brilliant banker, would want to own a group that has long been doomed to underperform.
When I was the Financial Times' Frankfurt correspondent and first arrived in the city more than 20 years ago, Commerzbank had a palpable sense of prestige. This was most evident in the $259 million Norman Foster-designed tower it commissioned to build as its headquarters (then the tallest building in Europe), and in an investment-banking division that was run like a hedge fund and produced comically volatile profits: billions in profits one quarter, billions in losses the next. Even before its debacle in acquiring local rival Dresdner Bank and real estate finance company Eurohypo, Commerzbank had earned the nickname Comedybank.
After a period of near collapse and attacks by vulture funds, it is finally starting to look attractive. Nearly 9 percent Nudge return on equity European average.
UniCredit is currently Double your profitshas secured the necessary funding to make a takeover bid. The company's stock price About 100 percent The book value of net assets is About 60 percent Commerzbank is holding its ground even after the excitement over a potential takeover bid.
What's more, the deal is attractive to UniCredit because it would increase its market share in Europe's largest economy, diversify its business outside its home country and reduce the premium that Italy's low credit rating adds to the bank's funding costs.
In Germany, he will likely face obstacles from politicians, unions and other stakeholders, but he may be able to garner some support by pushing the case that unifying Germany's notoriously fragmented and inefficient banking market would be good for the country's economy. His ambitions are also likely to find support among European policymakers. The European Central Bank, which would have to sign the deal, has long called for cross-border mergers, which it says would strengthen the single market for finance and narrow the gap with the big Wall Street banks that currently dominate Europe's investment banking market.
If a deal goes through, Mr. Orsel may not appreciate the parallels to RBS-ABN in 2007. That deal created the world's biggest bank, but it then nearly collapsed and was bailed out by the British government. “It was a crazy moment for everybody,” says one former colleague of Mr. Orsel. Perhaps UniCredit-Comerzbank could be a redemption deal.
Patrick Jenkins
