(Bloomberg) -- Commerzbank AG pledged to increase profitability and pay out more money to investors as it enters talks with rival UniCredit SpA.
Chief Executive Officer-designate Bettina Orlopp told a conference Thursday that she’ll meet with UniCredit on Friday to discuss any proposals the Italian lender has after taking a major stake.
Commerzbank also unveiled ambitious new financial targets, including for higher profit and shareholder payouts. The shares rose as much as 6.1% in Frankfurt trading, to the highest in more than 12 years.
Orlopp is seeking to shore up investor support after the Italian rival secured a 21% stake and said a full takeover is an option. While the government in Berlin opposes an acquisition, it indicated there’s little it can do to prevent the Italian rival from raising its holding. An influential shareholder has called on Commerzbank to engage with its suitor.
“We will stay very open minded,” Orlopp said at an investor conference hosted by Bank of America Corp. “UniCredit is now a shareholder, an investor, and it’s very normal that you exchange views.”
Combining two franchises can create cost savings, but also distractions among employees and execution risk, she said. If some clients bank with both firms, there’s also the risk of client attrition.
“That is something we need to jointly analyze,” she said. “The last thing which we want is any destruction, any harm to our bank, to Commerzbank and the core values there.”
The stealthy way in which UniCredit built its stake, with the government claiming it was surprised by the move, has left Berlin irritated. Concerns that a foreign owner could threaten funding for the country’s small and mid-sized companies also played a role in the government’s opposition to a deal.
Chairman Jens Weidmann, a former Bundesbanker, said the new targets show Commerzbank can expand its “independent position.” He also hinted at its crucial role in funding the country’s companies, calling the lender “a reliable partner” for the domestic economy.
“As ‘Bank for Germany’, we firmly believe that it has considerable growth and appreciation potential,” he said in a statement.
The board led by Weidmann this week named Orlopp, the bank’s chief financial officer for the past years, as new CEO, with incumbent Manfred Knof set to leave next week. Knof had indicated just before UniCredit’s interest became known that he didn’t want to seek another term.
Among the targets presented Thursday is a goal for profit to rise to €3.6 billion ($4 billion) by 2027, before any payments on AT1 securities. The lender plans to pay out more than 90% of profit, after payments on AT1s, to shareholders for the years 2025 to 2027. It also pledged to raise its return on tangible equity, a key profitability metric, to more than 12% by 2027.
UniCredit CEO Andrea Orcel has said that he’ll seek to influence Commerzbank’s strategy, whether a takeover happens or not. He has pointed to UniCredit’s higher profitability as evidence that his ideas would be beneficial for all shareholders in the German lender.
Commerzbank should be willing “to have an open dialog,” Alexandra Annecke, a portfolio manager at Union Investment, said Wednesday. “Cooperation with UniCredit - in whichever form - doesn’t need to be to Commerzbank’s detriment.” Union Investment says it owns 1.5% in the lender.
(Updates shares in third paragraph, adds Orlopp comments starting in sixth.)
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