UniCredit Says Commerzbank Needs Reforms to Boost Profit

UNICREDIT SPA has publicly challenged the future viability of COMMERZBANK AG in its current form, asserting that the German lender must undergo significant structural changes to remain competitive. The Italy-based financial institution, which has identified Commerzbank as a takeover target, released a plan on Monday aimed at boosting the earnings of Germany's second-largest bank. UniCredit's "Commerzbank Unlocked" strategy projects that the lender could reach a net profit of approximately 5.1 billion euros ($6.0 billion) by 2028. This target exceeds the current market consensus of 4.5 billion euros by 600 million euros. Andrea Orcel, CEO of UniCredit, emphasized that these gains would be structural and independent of any existing profit target upgrades. > "Commerzbank risks becoming increasingly unfit for a banking environment that is changing rapidly," Orcel said. The proposal identifies rampant bureaucracy and excessive non-staff costs as primary areas for improvement. Orcel suggested that these issues could be addressed through a revamp similar to the one UniCredit implemented at its local unit, HVB. The majority of the proposed cost reductions would focus on the bank's international network rather than its domestic German operations. Regarding the potential acquisition, Orcel noted that the current bid premium is low, and he expects limited acceptance of the offer at this stage. He indicated that UniCredit is prepared to maintain its current stake, which is expected to remain around 30%. > "One scenario is we expect low take up, we're happy. Financially, we win, we sit back and probably people will thank us in two years because we may do a transaction better," he said. Commerzbank has declined to comment on the latest developments. The bank has previously stated its intention to remain an independent entity, a stance that has received backing from the German government.