UniCredit, Commerzbank deliver contrasting quarters amid tie-up chatter

(Sharecast News) - Italian bank UniCredit and Germany's Commerzbank delivered contrasting third-quarter earnings on Wednesday as UniCredit pursued an increased stake in Commerzbank, potentially setting the stage for one of Europe's largest banking mergers in over a decade. UniCredit reported an 8% rise in net profit to €2.51bn, significantly surpassing forecasts and prompting the Milan-based lender to lift its full-year profit guidance above €9bn.

Chief executive officer Andrea Orcel emphasised the group's robust profitability, with the bank seeing record earnings across its regions and planning to boost shareholder distributions next year.

Conversely, Commerzbank's net profit fell 6.2% to €642m due to declining interest income and a near-tripling of loan-loss provisions, though the result still exceeded analyst estimates.

The German lender reaffirmed its annual profit outlook of €2.4bn, announced a €600m share buyback with an additional €400m planned pending regulatory approval, and continued its strategy of capital efficiency, led by CEO Bettina Orlopp.

Seeking to reinforce Commerzbank's independence, Orlopp had been working to free up capital through risk-weighted asset reductions and significant risk transfers to bolster shareholder returns and pursue profitable growth.

UniCredit's acquisition of a 9% stake in Commerzbank, along with an 11.5% derivatives position, came as part of Orcel's gradual approach to a potential merger, which he asserted could create value for both banks without client attrition.

However, the German government, which retains a stake in Commerzbank from a financial crisis-era bailout, had signalled caution toward a merger - a sentiment echoed by Orlopp, who maintained that Commerzbank's independent strategy was the stronger path forward.

Despite the tensions, UniCredit's Orcel remained optimistic about the long-term potential of a tie-up, while also indicating he could sell the stake at a profit if a merger proved unfeasible.

At 1157 CET (1057 GMT), shares in UniCredit were up 0.23% in Milan at €42.94, while those in Commerzbank were down 3.13% in Frankfurt at €16.08.

Reporting by Josh White for Sharecast.com.