A Commerzbank takeover? Some Mittelstand executives say why not

Two years ago Jessica Beitzel could only find one bank to fund her acquisition of a funeral parlour in the north-western German town of Dormagen.

While most lenders she approached “jumped at the first hurdle”, she said “the Commerzbank advisers were very co-operative right from the start, always thinking in terms of solutions”.

Her views on a potential takeover of Commerzbank by Italian rival UniCredit, which has built a 21 per cent stake in the German lender, are pragmatic, however. “For me, it’s not important whether the head office is in Milan or Frankfurt — what matters is that they remain customer-orientated and easily accessible,” the 36-year-old told the Financial Times.

As she was “very satisfied” with Commerzbank’s service, her key concern was whether potential new owners would “keep it that way or set other priorities”.

Beitzel is not the only representative of the Mittelstand — the hundreds of thousands of small and medium-sized enterprises that form the backbone of Germany’s economy — who is ready to give UniCredit the benefit of the doubt if the Italian lender purchases Commerzbank.

In multiple interviews, executives at such companies and their advisers have expressed measured scepticism at the prospect, contrasting with the stiff opposition UniCredit has faced in government, political circles and SME lobby groups.

Chancellor Olaf Scholz has labelled the Italian bank’s stakebuilding an “unfriendly attack” while Friedrich Merz, leader of the German opposition Christian Democratic Union, said a tie-up of the two banks would be a “disaster for Germany’s banking market.”

Berlin and trade lobby groups have seized on Commerzbank’s prominent role in funding the Mittelstand. The Frankfurt-based lender has also made it a cornerstone of its defence, warning that lending decisions and risk management could be moved to Italy. SME lobby groups have also said that a sale to UniCredit would leave the economy with only one German-based lender operating nationwide: Deutsche Bank.

But away from Berlin in the country’s industrial strongholds, those deemed most at risk from such a deal keep an open mind.

The Italian bank would probably expand rather than shrink its lending activities given one of its key motivations for a deal was to increase its footprint among German corporate clients, said Matthias Wittenburg, a former Commerzbank banker who advises SMEs on mergers and acquisitions.

“UniCredit is intelligent enough to know how it needs to serve medium-sized customers so that they remain loyal to the bank after a merger,” he said.

Commerzbank’s book of loans to corporate clients in Germany stood at €99bn at the end of June, a 19 per cent increase since 2021. Over the same period, overall bank lending to companies in Germany rose 12 per cent, according to Bundesbank data, while the corporate loan book of UniCredit’s German subsidiary HypoVereinsbank remained unchanged at €90bn.

A merger could improve the balance sheets and profitability of both banks, while an enlarged lender might be a more reliable partner for corporate clients, said Hans-Jürgen Völz, chief economist at SME association BVMW. Since 2020, German companies have on average had to pay higher interest rates on bank loans than their peers in Italy, ECB data shows.

“Strong and solid financial partners are extremely important for SMEs,” Völz said.

Veit Ulbricht, an executive at agricultural machinery dealership Heinrich Moerschen in Tönisvorst, near Düsseldorf, said he was pleased with HypoVereinsbank’s services.

The UniCredit-owned bank, which is one of its lenders, along with municipality-owned savings institutions and co-operative banks, was a “highly rated” banking partner that was more willing to participate in riskier transactions than others, he said.

Italy and Germany shared similarities, he added, among them a good industrial base, a strong middle class and many export-oriented family businesses.

“The Italians are more federal and regional, just like us Germans,” Ulbricht said. “They have a great deal of respect for Germany, and they have a great interest in Germany.”

Therefore moving decision making to Milan would not make much sense for UniCredit, Ulbricht said. He could not “imagine UniCredit tripping itself up and slowing down decisions out of sheer centralism”.

Many still remain wary about losing an independent lender delivering a critical lifeline to German exporters. Commerzbank handles about 30 per cent of German foreign trade finance, noted Gitta Connemann, a politician who chairs an SME advocacy group within the centre-right CDU.

“The financial market needs a second large private bank as an independent player,” said Marie-Christine Ostermann, president of the German Family Business Association, adding that “further concentration” among banks was “not attractive” for German SMEs.

“Many SMEs value strong regional roots of their banking partners, fixed contacts, discussions at eye level,” Marc Tenbieg, managing director of German SME Association DMB, also cautioned. Foreign bank owners may have “less understanding of German market conditions”, he said.

People close to Commerzbank’s top management have also said that companies that are customers of both Commerzbank and HVB might look for other lenders to diversify their access to loans should a takeover proceed.

Rivals to the two banks see the potential upside. Lutz Diederichs, head of BNP Paribas’s German operations, said he knew “from experience that when a merger is coming, a loan book will not be one plus one equals two”.

“This is clearly an opportunity for us, without any doubt,” he said.

But Kay Theuer, managing director of Priwatt, a Leipzig-based provider of domestic solar power systems that banks with both Commerzbank and HVB, is unfazed and expects no negative repercussions for his business.

“We’ve been talking about changes in the European banking landscape for 15 years,” Theuer said. “It is understandable that mergers are now taking place, especially within the Eurozone.”