UniCredit has offered to acquire Italian rival Banco BPM for approximately $10.5 billion in an all-stock deal, aiming to consolidate its position as a leading pan-European banking group. This move is part of a broader trend of mergers in the European banking sector, although it is separate from UniCredit's ongoing interest in increasing its stake in German bank Commerzbank. The offer represents a slight premium over Banco BPM's recent share price.
European stock markets were higher as UK GDP figures showed the economy fell into a technical recession, with the Stoxx 600 index up 0.7% and major bourses in positive territory. Germany's Commerzbank posted a 55% jump in full-year net profit, while planemaker Airbus announced a special dividend of 1 euro per share. Japan's Nikkei 225 closed above the 38,000 mark for the first time since 1990, and bitcoin hit an over two-year high amid favorable regulatory activity.
Commerzbank reported a 55% increase in net profit for 2023, reaching 2.2 billion euros, its best results in 15 years, driven by high interest rates. Despite a 16% decrease in fourth-quarter net profit, the full-year performance exceeded expectations, leading to a 3.7% rise in shares. The bank anticipates challenges from the economic slowdown but expects net profit to surpass 2023 levels. Following a successful business overhaul, Commerzbank reduced costs and received positive analyst ratings.
Deutsche Bank CEO Christian Sewing stated that mergers and acquisitions are not a priority for the bank at the moment, dampening rumors of a potential tie-up with Commerzbank. Sewing emphasized the importance of regulatory preconditions and fair value gaps in the banking industry, and highlighted the focus on the bank's own business. While acknowledging the inevitability of a recession in Germany, Sewing urged leaders to accelerate the country's decoupling from China.
Speculation about a potential merger between Deutsche Bank and Commerzbank has resurfaced as Germany considers selling stakes in state-owned companies to raise funds. While no decision has been made on the government exiting its 15% stake in Commerzbank, Finance Minister Christian Lindner is open to the idea. Deutsche Bank has reportedly been discussing potential mergers, including with Commerzbank, and its low valuation and the need for asset write-downs could complicate any potential deal. The German government plans to raise up to 4 billion euros this year by selling company stakes, with the proceeds potentially going to state-owned rail company Deutsche Bahn.
A US judge has dismissed most of Commerzbank's lawsuit against Bank of New York Mellon (BNY Mellon), where the German bank sought to hold BNY Mellon liable for over $1 billion in losses on toxic mortgages purchased before the 2008 financial crisis. The judge rejected Commerzbank's claims on all but 13 of the 100 certificates and notes it bought and dismissed all negligence claims against BNY Mellon. The surviving claims cover 13 certificates that Commerzbank bought from Barrington II CDO Ltd, but only as to whether BNY Mellon acted as a "prudent person" following borrower defaults.
The chief financial officer of Commerzbank, Bettina Orlopp, believes that the European Central Bank (ECB) has likely paused its rate hiking cycle and is unlikely to raise rates in September. This contradicts the expectations of several analysts who anticipate a final rate hike next month. Commerzbank, the second largest lender in Germany, reported a 20% increase in net profit and higher-than-expected revenue in the second quarter. Orlopp stated that if there were to be another interest rate hike, it would be an upside potential for the bank. The ECB's decision in September will depend on data, but some experts believe that the peak in rates is approaching.
Commerzbank has increased its year-end gold price target to around $2,000 an ounce, up from the previous target of $1,950 an ounce, and sees gold prices holding a steady average of $2,050 an ounce in the fourth quarter of this year and the first quarter of 2024. The bank warns that investors will probably have to wait until at least the second quarter of next year before gold sees a sustained break above its all-time highs. Although the Federal Reserve may not be looking to raise interest rates anytime soon, Commerzbank said it is unlikely they will cut rates this year.
