This is The Pulse with Francine Lacqua. The German Chancellor says he is against hostile tactics in the country's banking sector after Commerzbank formally rejected UniCredit's takeover bid, saying it lacks value and undermines trust. With us for an exclusive conversation is the Chief Executive of UniCredit. The Chief Executive of Commerzbank dismissed this as a speculative attempt to dismantle Commerzbank's successful business model. How do you respond to that? Does this definitely close any room for negotiation?
Thank you, Francine. From our standpoint, we have been consistently trying to engage in a meaningful dialogue to review facts as opposed to statements that we do not believe are backed by facts. As a shareholder, we feel strongly that we need to be ambitious. We have demonstrated UniCredit. We think Commerzbank can express more value than it does at the moment, mostly for shareholders but also its employees and the clients it serves. Furthermore, we do think the current plan puts Commerzbank at risk in the medium-term to face a competitive environment, to face risk 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. As you know, on April 7, Commerzbank was very clear that if they remained on their position that the bank needed to remain independent and there was no value and refused any further engagement with us.
Where does that leave you? Cross-border bank deals often proceed without management support. Rarely do they proceed without government support or the government saying this does not work for them. Are you prepared to move forward without political support in Germany?
I share a lot about this is a cross-border deal. This is effectively a merger between the second and third largest bank in Germany. If you look at the views we provided yesterday, most, if not all the value comes from the merger of two separate second and third banks in Germany. It is a market deal. It's not a cross-border deal. Obviously the group is pan-European and would incorporate that bank into the product group. With respect to the situation and the position of everybody, we believe we have been very respectful for 18 months. Taking an option, transparently we reached a 30%. We launched an offer. We tried to engage within the offer to lend a giant plan in the best interest of everybody. We were dismissed after two weeks with a refusal to engage on any detail. 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 the 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. We restricted that just to our views to provide the basis of our engagement. If further engagement occurs, we would welcome it. If it does not, it is now up to the 70% shareholders beyond us to take a view of 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, provide an opportunity to do a deal further down the line with much better terms. If instead we get a landslide and we reach control, then we will implement the views we have put forward, views that we already successfully implemented across 13 banks in the UniCredit group. We will create value. From our standpoint, we have done everything we needed to do in order to be in a position to let shareholders and stakeholders of Commerzbank make a decision.
We reported last week the ECB is considering requiring you to consolidate Commerzbank. How likely is that if your stake rises above 30% but stays below 50%? Would that impact your capital buffer?
Control is a topic interpreted differently in Europe. In some jurisdictions you need to be about 50 plus one. This is, for example, the case for Poland. This is the case in Germany. For us to reach control, we would need to demonstrate structural control of Commerzbank. Something we can manage very easily not to do. We will have two scenarios. One where we don't have control and go back to the status quo, launch our share buyback, and full focus on implementing our Unlocked plan. We will see results already, we have that in our May 5 results. We will wait to see what happens with Commerzbank. With respect to capital, we have been very clear. In a 100% deal, we parked about 200 basis points. A 50% deal impacts 280 basis points. It is 80 basis points more. That affects our returns. In terms of capital position, we have enough capital to offer service.
After crossing the 30% threshold, what is the trigger point to launching a full takeover offer?
In Germany we already have a lot offered for 100%. From our jurisdictions, we have offered to buy up to 100% of the capital of Commerzbank. If we cross 30% we are no longer obliged for any other offer. If we cross 30% and remain below control, it will be our decision if and when we want to increase participation to reach control and move out. For the time being, the signal was clear yesterday. But after trying this to bridge the gap between us and Commerzbank, launching an offer, if we do not reach an offer we will focus on other topics we have internally.
How many investors from Commerzbank do you think will accept the offer? What is your baseline?
I normally don't speculate. I use facts. That is why I am cautious when I say some things. In my opinion it is up to about 70% to take a view. We have shown very clearly what is the financial case to tender. We have put forward our views of the value we can create. There is now no doubt we can create substantially more value and even more if we reach a combination. The numbers are not unchallengeable because they emerge directly from what we have already done at AG and across UniCredit in the last four years. We know how to implement it. We will implement it and we know what we are talking about. It is about that. The shareholders will need to decide if they believe weighting is better for them. We want to know that until the very end of the offer. We have reached 30% and we have tried to engage for 18 months. We launched an offer to have an opportunity for meaningful, transparent engagement to address a lot of topics being thrown at us. That, so far, has failed. Commerzbank refuses to look at any other alternatives. Shareholders are now aware of the reviews, the risks, the possibilities in a position to take a view. We are happy to engage constructively but if that is not possible we will see where we are at the end of the offer.
Strong cuts to the bank's international operations. Commerzbank is also an important source of trade finance for a lot of German exporting countries. Do you think that could be a problem for those clients?
I don't. UniCredit has a trade finance business that is about $1.6 billion. This is double the trade finance business of Commerzbank. We support a trade finance business with 20 offices around the world. Our service is fully automated. We use AI. We have a level of service that is recognized broadly. More than 100 offices are a mix and match between trade finance and other activities like trading hubs, local lending to local companies that have nothing to do with the core business of the German and indeed the Polish bank. For us, trade finance is a core business. It is a core business for which we are recognized. We keep winning prizes every year for best service in that business. The last thing we would want to do is affect in any way the access to our trade finance and correspondent banking services across the globe. Both services are much more efficient and effective and better services than the one of banks that use the old model we believe Commerzbank uses.
Is that what unions and the governments are worried about, this deal?
On the job cuts, the numbers flying around talked about 15,000. Number one is less than half. Commerzbank already committed to cut 4,000 jobs, all in Germany, hiring internationally and redeploying headcount outside Germany. Put that in context. With our 7,000, that would be done mostly the first 5,000 or so over a period of 3-4 years. In the combination you are talking 4, 5, 6 years out. Very significant attrition. There is a significant reinvestment. A number of those productions are done in areas that are very bureaucratic and overpaid, in our opinion. Are there job cuts? Yes. I don't think they are meaningfully different from what Commerzbank proposed. Of those job cuts are not going to grow and expand internationally and blend in other countries. They are done to strengthen the business in investing more in technology, in AI and redesigning the entire operating machine. The very big difference between Momentum and Unlocked is Momentum at the end of the plan delivers a bank that after we 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 and Europe. So Unlocked is vital, Momentum would just report yet another restructuring plan to address the gap that would be accumulated again in the next three years to visit the sector.
Do you think there's a chance that the government, the German government comes out and blocks it like the government did with that BPM?
I respect their position, I would have hoped that we would have engagement to explain every topic and step in detail and argue our case, something we've been able to do.
What is your thinking about acquisitions in Italy? Are you still valuing something with Monte Paschi?
I think our name comes very often in a position for two reasons. One because 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. As I said and continue to say, we are very committed and have demonstrated it again and again to our organic growth initially with Unlocked. Those two plans have delivered a lot more value and will deliver a lot more value than any position. I think it is the duty of the leadership to look at the option. In Italy we have 9.9% market share of the market. So there is a basis to look at the option to strengthen our market share. But we need to find opportunities that work and we need to find opportunities that fulfill our financial metrics. With very disciplined on the returns to be had and given the success and what I will understand the success of Unlocked in the next 20 quarters, we do not need to make a position. We will do them only if they have incremental value.
Thank you so much as ever for giving us a little bit of time and your very busy schedule. UniCredit Chief Executive speaking to us. Plenty more throughout the day with this story. President Trump has told Bloomberg he is unlikely to extend the two-week ceasefire with Iran which he says is due to expire Wednesday. Details about the next negotiation session remain unclear. Bloomberg understands Tehran is prepared to send a delegation to Islamabad after previously casting doubt on their participation. Just bring us up to date with how likely these talks are and what does it mean for the ceasefire?
I will tell you Francine that there are plenty of preparations underway in Islamabad. We are hearing thousands of security personnel being mobilized. Parts of the city are locked down because of these talks. But no official arrival yet of either one of the delegations. Over the weekend, President Trump himself suggested that the U.S. would be participating and later emerged JD Vance would be leading these discussions once again. He has not left yet so that is a key consideration as we think about the coming hours. On the Iranian side they are still being noncommittal and in the last hour state TV said they have not yet sent a team through Pakistan for these U.S. talks. What is emerging is a narrative over the course of the evening. We heard from the likes of the President who says that they will not negotiate under threat, a similar language coming through from the Speaker of the Parliament who led the prior round of discussions. Also suggesting as long as the U.S. naval blockade persists, they will be less inclined to participate in those discussions. I guess where we go from here will be a function of what the U.S. and President Trump decides to do with that U.S. naval blockade. Whether he lifts it temporarily in order to induce the Iranians to come to the negotiating table, but at the same time we know the clock is ticking. He had a phone call with one of our colleagues from Bloomberg yesterday and suggested the ceasefire deadline had moved back by 24 hours to Wednesday evening which gives a very small window to get a deal across the line. At the same time President Trump is also warned that the military is locked and loaded and ready to go again and the Iranian Speaker of Parliament has said that they are also preparing to return back to the battlefield so another crucial 24 to 48 hours coming up. What we should be watching from here is whether Iran commits to sending a delegation and whether JD Vance actually leaves the U.S. because that would be a sign the talks are going to happen.
Thank you so much. Focusing on the U.S. delegation with Vice President JD Vance in a bid to resume negotiations with Iran. We are joined by Anna Rosenberg, always great to speak to you. There are two main sticking points. Can we muddle through a deal if there's even a deal to be had?
As long as you put the nuclear issue back into this deal I don't think we will get a deal because it is so contentious. The U.S. has been negotiating this for years and it has not been solved. If there is a deal and it's a narrow deal it will be no more aerial strikes against Iran by the U.S. in exchange for opening the Strait of Hormuz. That is as possibly deal as you will get. And it is likely that we will get this deal because ultimately we need to look at what constrains both sides. And the fact is neither the U.S. nor Iran have an interest in more escalation. So I think we will get a deal that as I said is just no more bombs for the Strait of Hormuz but the more he insists on solving the nuclear issue with this the more difficult it will get towards a deal which increases the escalation risk.
Does it give the regime an upper hand? Stronger than they were six months ago. It gives them in a most effective control of Hormuz.
We don't know how strong they really are and they've been bombed for several weeks. Over the past couple of years the Israelis have been trying to decimate the militias in the region for a diverse military capabilities, reduced nuclear capabilities. So I'm not sure they are really stronger. I don't think we know enough about that. But the issue around Hormuz is critical for the U.S. because this is about who controls freedom of navigation. That's core U.S. policy principle since the end of Second World War. They cannot allow Iran to control Hormuz. They cannot allow Iran to implement tolls. If the Iranians don't back off on this issue I think the U.S. will have to escalate and we will have to send in boots on the ground. It's why this issue is important because it will challenge the U.S. on a global level not just in Hormuz but other areas.
Rumors that it never been confirmed by the Iranians asking for yuan for the safe passage. This is not confirmed but there is always trying in the background. They don't like it messy but they're also not calling Iran and saying this is it. So what's China's role in all of this?
Supposedly they have an interest in seeing the U.S. weakened and trust in U.S. being undermined. But that's a far cry away from supporting Iran outright. Because ultimately when you look at what is in China's interest it is that we see ongoing global trade, we see as least economic friction as possible. In China you have a social contract between the population which is I give you economic growth in exchange you give me political control. That has to work based on global exports and free trade flowing. So China does not have an interest in seeing the Strait of Hormuz closed for longer. Asia is the most affected regions. What we are seeing with Russia and Iran is similar, China has supported Russia and Iran in a kind of lukewarm way. Yes, companies are selling dual-use technology because they are taking advantage. They have an interest in seeing a multipolar world order but it is not an alliance and there are real limits for China to go in deeper in support Iran. Ultimately China has been trying to put diplomatic pressure on Iran.
I don't know what the chances you think of getting to a kind of deal. For the safe passage of Hormuz. Does it flare up until there's a bigger agreement and how long can it take?
This is a muddy deal, it's not to be a clean deal. How it was before the war. Ultimately you have a regime in place and the Israelis are not happy with that. They will continue to undermine the regime. There are also oppositional forces within Iran that are not happy with the regime. So we're likely to see more which means even if this detente between the U.S. and Iran, other forces will seek to destabilize the regime which this regime will continue to flex its muscles, threatening the Strait of Hormuz or occasionally threatening the Gulf. That's the new normal that we all have to accept. It's quite likely we will be in this environment because a real implemented solution to the nuclear issues is very hard to achieve.
Do you have to also deal with Iran because it's a huge problem for your economy given what's happened in terms of strikes over the last six weeks or are you more anti-U.S. than you were before?
Clearly the Gulf states are looking at this and their business model threatened. There will be a persistent risk premium until you have regime change. They tried to improve their relations with Iran before. We've seen this a couple of years ago and after the U.S. after the Trump administration failed to protect them and so they are asking themselves questions right now. That's why the risk of escalation is not gone because as long as the regime stays in place this business model is threatened. So I think it is clear there is still a lot more uncertainty even though the hot phase of the war, the aerial bombardments, is more likely over than not. But as I said the nuclear issues can muddle into this negotiation the higher the escalation risk.
Thank you as always. Coming up, the dangers to the global economy from inflation and deflation. We will discuss that coming up next. This is Bloomberg.
Good morning. I'm Francine Lacqua in London and these are your top stories. We had President Trump signals he is unlikely to extend a two-week ceasefire with Iran. John Ternus will replace Tim Cook as CEO. Plus the German Chancellor slams hostile tactics in the banking sector. We discussed the pursuit of Commerzbank. We just spoke to the UniCredit Chief Executive. U.K. Prime Minister Keir Starmer remains under intense pressure over the appointment of Peter Mandelson as Ambassador to the U.S. The top civil servant was fired by Starmer over the scandal and was testifying before the Foreign Affairs Committee. Robins said he was pressured by the Starmer office to appoint Mandelson. I think he actually said here he felt the pressure to appoint him. As we wait to see if Iran and the U.S. resume peace talks, the economic consequences of the war spread. Our next guest says it is a rare moment with powerful forces pulling prices in the opposite direction. Congratulations for everything you do. It is a very, very unusual moment in time where everything seems in flux. Are we paying enough long-term attention to what AI does to inflation, deflation, and jobs?
This is a very unique time because most business and policy have not had to contend with the issue of inflation since the COVID era and have not been thinking about deflationary effects. There has been discussion of what that might mean longer-term. What I have been thinking and writing about recently is the fact that near-term, the next 6-9 months, we are facing a lot of inflationary pressures, largely catalyzed by the Strait of Hormuz and issues around disruptions from energy, fertilizer, and inputs such as helium to semiconductors. Obviously, food production will be impacted. And that is the inflationary piece. Longer-term a question of inflation will be driven by AI. Over time, technological changes of consumer goods, transportation have declined. This will, no doubt, be similar. Deflationary effects have impacts on bottom lines.
You try to find solutions for this. Whose job is it to make sure their workforce is ready? Chief executives or is it up to the governments to understand real long-term consequences?
The AI super cycle is absolutely another opportunity for organizations, private businesses, as well as governments to come together to solve a structural problem impacting prospects for economic growth and living standards long-term and has knock-on effects for society and how we live. Traditionally we have been working in different pockets. As a member of the House of Lords, public policy is busy feverishly thinking about AI and what it means for jobs, taxes, and the welfare state. On corporate boards we have to think about not just short-term benefits that might come from rightsizing an organization, but longer-term, the Henry Ford clip of who will buy your products? We have to think about the role of corporations in a broad sense. That balancing act is something called in for business leaders as well as political leaders to come together to think about what does this look like? Not just in terms of where equilibrium will be longer-term but how we transition through challenging periods.
