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The German Chancellor says his government is against hostile and aggressive tactics in the country's banking sector. Fredrich Meers was speaking to industry executives after Commerce Bank formally rejected unicredits takeover bid, saying it lacks value and underminds of trust with us now for an exclusive conversation. Is the chief executive of UniCredit Andre Orchell Andre, thank you so much
for joining us. Bettina or Lop, the chief executive of Commerce Bank, dismiss this as a speculative attempt to dismantle commerce bank successful business model. How do you respond to that and does it definitely close any room for negotiation?
Thank you, friend sein Well.
From our standpoint, we have been consistently trying to engage in a meaningful dialogue to review facts as opposed to statements, but we do not believe our back by facts. As a shareholder, we feel very strongly that we need to
be ambitious. We have demonstrated at unique credit and we think Commerce Bank can express a lot more value than it does at the moment, both for its shareholders but also for its employees and the clients it search Furthermore, we do think that the current plan puts Commerce Bank at risk in the medium term to face a competitive environment, to face risk that would require yet another restructuring plan and a difficult one, or put the entire bank at risks.
For that genuine concern, we have put our views forward yesterday after failing to have any meaningful engagement, and as you know on May sevens. On April seventh, Commerce Bank was very clear that they remained on their position that the bank needed to remain independent and that there was no value and refuse any further engagement with us.
So where does that leave you? Across border bank deals often proceed without management support, but rarely do they proceed without government support, or at least the government saying actually, this doesn't work for them. Are you prepared to move forward without political support? In Germany?
So I hear a lot about this is a cross border deal, but.
This is effectively mostly a merger between the second and third largest bank in Germany.
And if you look.
At the views we provided yesterday, most if not all, of the value comes from the merger of two separate second and third banks in Germany. So it is an in market deal. It is not a cross border deal. Obviously the group is ban European and the group would incorporate that bank into the broader group, but it is an in market merger. With respect to the situation and the position of everybody, we believe we've been very respectful for eighteen months. We both mistake in an auction transparently.
We reached thirty percent. We tried to engage for eighteen months. We launched an offer. We tried to engage within the offer to land a joint plan in the best interest of everybody. We were dismissed after two weeks with a refusal to engage on any detail, and therefore we have no other option but to present our views publicly, given that we have an offer document and we need to
explain what is in that offer document. Commerce Bank was well aware that if we did not present a joint plan, we would have had to come back with a plan from our side, and we restricted that just to our views to provide a basis for further engagement. If that further engagement occurs, we would welcome it. If it doesn't, it is now up to the seventy percent shareholders beyond us to take a view whether they want to remain in Commerce Bank with the current premises, or whether they
want to do something else. For UniCredit as a shareholder, we have a win win. If we land below control, this is the scenario that will provide us with the absolute best returns and in our opinion, will provide an opportunity to do a deal further down the line at much better terms. If instead we get a landslide and we reach control, then we will implement the views that we have put.
Forward, views that we have already successfully.
Implemented at HVP and across thirteen banks in UNI Credit Group, and we will create value above the cost of equity. So from our standpoint, we've done everything we needed to do in order to be in a position to led shareholders and indeed the other stakeholder of Commerce Bank make a decision.
We reported last week that these is considering to require you to consolidate Commerce Bank. So how likely is that to happen If your stake rises above thirty percent but stays below fifty percent, would that impact your capital buffer?
Look, the control is a topic that is interpreted differently in Europe. As many other things, in some jurisdiction you need to be above fifty plus one. This is, for example, the case of Poland. In other jurisdiction you need to demonstrate structural control of a shareholder meeting. This in fact is the case in Germany. So for us to reach control, we would need to demonstrate structural control of the AGM of Commerce Bank, something that.
We can manage very easily.
Not to do so we will have really two scenarios, one where we don't have control and we go back to status chore, launch our share back and go back to full focus on implementing our unlimited plan. You will see results of that already in our main fifth results and the wait to see what maps up in Commerce Bank. With respect to the impacts on capital, we have been very clear. A one hundred percent deal impacts about two
hundred business points. A fifty percent deal impacts about two hundred buses eighty business points excluding the pull to part, so it's eighty business points more. That affects our returns. But in terms of capital position, we have enough capital to absorb both.
What would be the trigger point so you know, once you cross after crossing that thirty percent threshold, what's the trigger point then launching a full takeover offer.
So let's be very clear.
In Germany, we have a ready offered for one hundred percent, so differently from average jazisdictions, as we have offered to buy up to one hundred percent of the capital of Commerce Bank. If we cross the thirty percent in this offer, we're no longer obliged to offer to do any other offer and can freely buy in the open market as much as we want all the way up to one
hundred percent without ever launching another offer. So if we cross thirty percent and remain below control, it will be our decision if and when we want to increase that participation to reach control and to move up and for the time being a signal clearly yesterday, but after trying this other step to bridge the gap that exists between US and Commerce Bank, i e. Launching an offer, if we do not reach control, we will take a post and we will focus on other topics that you have internally.
I mean, at this point, with what you know now, how many investors from Commerce Bank do you think we'll accept the offer? What's your base case or your baseline?
I normally don't speculate and I use facts. Probably that's why I am conscious when I say some things. In my opinion, it is up to that seventy percent to take a view. We have shown very clearly what is the financial case to tender. We have put forward our views the value we can create, and there is now no doubt that we can create substantial more value than what is in momentum, and even more if we reach
a combination. The numbers are not challengeable because they emerge directly from what we have already done at HVB and across UNI created in last for years. So it's our blueprint. We know how to implement it. We will implement it,
we will extract those value. We know what we're talking about, So it's only about that the shareholders will need to decide whether they believe waiting is better for them or tandering is better for them, and I guess we will not know that until the very end of the offer. But as I said, for us, we have reached thirty
We've tried to engage for eighteen months. We launched an offer in order to have an opportunity for a meaningful, transparent engagement to address a lot of a topic that are now being front at us that so far has failed. Commerce Bank has remained on the position of day one and refuses to look at any other alternatives. So shareholders are now aware of our views, of the risks, of the possibilities, and we're in a position to take a view, and for the time being we're here. We would be
very glad to engage constructively. But if that is not possible, the offer will run its course and we will see where we are at the end of the offer.
Andrew Rochelle, your proposals to boost commerce bank standalone profitability are around strong cuts to the bank's international operations. But Commerce Bank is also an important source of trade finance for a lot of the German exporting countries. So do you think that could be a problem for those clients.
No, I don't. This is another piece of misinformation. UniCredit has a trade finance business that is about one point six billion. This is double the trade finance business of Commerce Bank. We support that trade finance business with twenty offices around the world. Our service is fully automated, we use AI and we have a level of service that
gets recognized broadly. Commerce Bank has half the business, more than one hundred offices which are a mixed and match between trade finance and other activities such as trading hubs, local lending to local companies that have nothing to do with the core business of a German and indeed the Polish bank. So for US, trade finance is a core business. It is a core business from which we are recognized and we keep on winning prizes every year for best
service in that business. So the last thing we would want to do is affecting any way the middle stand access to our trade finance and correspondent banking services across the globe. Indeed, those services are much more efficient, much more effective, and better services than the one of banks that use the old model that we believe Commerce Bank uses.
You're predicting seven thousand job cuts at Commerce Bank if those plans come to fruition. Is that what unions? So the governments are worried about this deal.
Well, on the job cuts, I would say that the numbers that were again flying around talked about fifteen thousand, So number one is less than half Number two. Commerce Bank itself has already committed to cut four thousand jobs, all in Germany, hiring internationally and redeploying head count outside of Germany. So put that in context with our seven thousand, which would be done mostly the first five thousands or so over a period of three to four years. The
remaining just in the combination. You're talking four or five six years out. Very significant attrition given the period of age, and there is significant reinvestment, and a number of those reductions are done in areas that are very bureauctic and overpaid in our opinion, and that need addressing at the center of function that Commerce Bank has. So are their job cuts, yes, they are. I don't think they're meaningfully
different from what Commerce Bank has proposed. And those job cuts are not done to go and expand internationally and lend in other countries, but they are done to strengthen the business in Germany by investing more in technology in AI and redesigning the entire operating machine. The very big difference between Momentum and Unlocked is that Momentum at the end of the plan delivers a bank that, after they have done those cuts, is still lagging the other peers
in Germany and in Europe. Unlocked at the end of the plan delivers a bank that is a leader versus the other German competitors and Europe. So Unlocked is viable momentum will just require yet another restructuring plan to address the gap that would be accumulated again in the next three years, to visa viva.
Sector Andre, Do you think there's a chance actually that the government, you know, the German government comes out and just blocks it like it to this government did with Manco BPM.
I cannot speculate on what the government will or will not do. I respect their position. I would have hoped we could have had engagement to explain every topic and every step in detail and argue your case, something that we have unable to do.
But it is very decision to make.
You know what you're thinking about acquisitions in Italy. Are you still evaluating something, for example with Monte Pasci.
Look, I think our name comes very often in acquisition, probably for two reasons, one because of my past job and two because uniqu credit being present in thirteen countries and having turned around in the way we have turned around, there is a lot of speculation that we may do a lot of things. So, as I said, and I continue to say, we are very committed and we have demonstrated it again and again and again to our organic growth.
Initially we've unlocked now we've Unlimited. Those two plans have delivered a lot more value, and then Unlimited will deliver a lot more value than any acquisition. That said, I think it is the duty of the leadership of Unique Credit to look at option.
In Italy.
We have a nine point nine percent market share of the market. The market is fragmented, so there is basis to look at option to strengthen our market share. There is basis, but we need to find opportunities that work, and we need to find opportunities that fulfill our financial We're very, very disciplined on the returns to be had and given the success of Unlocked and what I will demonstrate the success of Unlimited in the next twenty quarters,
we do not need to make acquisition. We will do them only if they ad incremental value.
Andrew Archill, thank you so much as ever for giving us a little bit of time in your very busy squasule. That was the UniCredit Chief executive