UniCredit CEO Andrea Orcel Talks Commerzbank Takeover | Bloomberg Talks

Thank you, Francine. 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 are backed by facts. As a shareholder, we feel very strongly that we need to be ambitious. We have demonstrated that UniCredit, and we think Commerzbank 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 serves. Furthermore, we do think that the current plan puts Commerzbank at risk in the medium term to face a competitive environment and to face risks that would require yet another restructuring plan, and a difficult one, or put the entire bank at risk. For that genuine concern, we have put our views forward yesterday after failing to have any meaningful engagement. And as you know, on May 7th, on April 7th, Commerzbank was very clear that they remained on their position that the bank needed to remain independent, and that there was no value, and refused any further engagement with us.

So, I hear a lot about this is a cross-border deal, but a VC 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 pan-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 18 months. We bought the stake in an auction. Transparently, we reached 30%. We tried to engage for 18 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 2 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. Commerzbank 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 70% shareholders beyond us to take a view whether they want to remain in Commerzbank 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 HVB and across 13 banks in UniCredit 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 let shareholders, and indeed the other stakeholder of Commerzbank, make a decision.

Look, the control is a topic that is interpreted differently in Europe, as many other things. In some jurisdiction, you need to be above 50 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 Commerzbank, 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 quo, launch our share buyback, and go back to full focus on implementing our unlimited plan. You will see results of that already in our May 5th results, and wait to see what maps out in Commerzbank. With respect to the impacts on capital, we have been very clear. A 100% deal impacts about 200 basis points. A 50% deal impacts about 280 basis points, 80 basis points excluding the pull to par. So, it's 80 basis points more that affects our returns. But in terms of capital position, we have enough capital to absorb both.

So, let's be very clear. In Germany, we have already launched an offer for 100%. So, differently from other jurisdictions, as we have offered to buy up to 100% of the capital of Commerzbank, if we cross the 30% 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 100% without ever launching another offer. So, if we cross 30% 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, I signaled clearly yesterday that after trying this other step to bridge the gap that exists between us and Commerzbank, i.e., launching an offer, if we do not reach control, we will take a pause, and we will focus on other topics that we have internally.

I normally don't speculate, and I use facts. Probably that's why I am cautious when I say some things. In my opinion, it is up to that 70% 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 emerged directly from what we have already done at HVB and across UniCredit in the last 4 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 tendering 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 30. We've tried to engage for 18 months. We launched an offer in order to have an opportunity for meaningful transparent engagement to address a lot of the topics that are now being thrown at us. That so far has failed. Commerzbank 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 they'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.

No, I don't. This is another piece of misinformation. UniCredit has a trade finance business that is about 1.6 billion. This is double the trade finance business of Commerzbank. We support that trade finance business with 20 offices around the world. Our service is fully automated. We use AI. And we have a level of service that gets recognized broadly. Commerzbank has half the business with more than 100 offices, which are a mix 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 Mittelstand 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, but we believe Commerzbank uses.

Well, on the job cuts, I would say that the numbers that were again flying around talked about 15,000. So, number one is less than half. Number two, Commerzbank itself has already committed to cut 4,000 jobs all in Germany, hiring internationally, and redeploying head count outside of Germany. So, put that in context with our 7,000, which would be done mostly the first 5,000 or so over a period of 3 to 4 years. The remaining just in the combination, you're talking 4, 5, 6 years out. Very significant attrition given the pyramid of age. And very significant reinvestment. And a number of those reductions are done in areas that are very bureaucratic and overpaid in our opinion. And that need addressing at the center of function that Commerzbank has. So, are there job cuts? Yes, they are. I don't think they're meaningfully different from what Commerzbank 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 in 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 3 years to vis-à-vis the sector.

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 our case, something that we have been unable to do, but it is their decision to make.

Look, I think our name comes very often in acquisition probably for two reasons. One, because of my past job, and two, because UniCredit being present in 13 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 with unlocked, now with unlimited. Those two plans have delivered a lot more value and the unlimited will deliver a lot more value than any acquisition. That said, I think it is the duty of the leadership of UniCredit to look at option. In Italy, we have a 9.9% 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 metrics. 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 20 quarters, we do not need to make acquisition. We will do them only if they add incremental value.