German authorities surprised by UniCredit attack on Commerzbank

Italy’s UniCredit appears to have blindsided German authorities with a possible multi-billion-euro merger with Frankfurt-based Commerzbank, a move that has sparked a fierce reaction in Berlin.

Market observers told CNBC that the takeover could have caused a national embarrassment for the German government, which is strongly opposed to the move, and some have argued that the outcome of the takeover attempt could even jeopardize the very meaning of the European project.

Milan-based UniCredit said on Monday it had submitted an application to increase its stake in Commerzbank to about 21 percent, taking its stake to as much as 29.9 percent. The move follows UniCredit’s acquisition of a 9 percent stake in Commerzbank earlier this month.

“If UniCredit were to acquire Commerzbank and bring its efficiency up to Commerzbank’s level, there would be huge benefits in terms of improved profitability,” Octavio Marenzi, CEO of consulting firm Opimas, said on CNBC’s “Squawk Box Europe” on Tuesday.

“but [German Chancellor] “Olaf Scholz is not an investor. He is a politician and he is very concerned about the employment side. And if you look at what UniCredit has done in terms of streamlining its Italian business and especially its German business, it is very impressive,” Marenzi said.

Finance Minister Olaf Scholz on Monday criticised UniCredit’s decision to increase its lending to Commerzbank, calling the move an “unfriendly” and “hostile” attack, according to Reuters.

Meanwhile, Commerzbank Vice Chairman Uwe Szege was reported to have voiced his opposition to a possible takeover by UniCredit on Tuesday. Speaking outside the bank’s headquarters in downtown Frankfurt, he said his message was simple: “We don’t want this.”

“His promises of cost cutting make me nauseous,” Chage reportedly added, referring to UniCredit CEO Andrea Orsel.

Meanwhile, Commerzbank auditor Stephan Wittmann told CNBC on Tuesday that up to two-thirds of the bank’s jobs could be lost if UniCredit is successful in its hostile takeover.

The bank has not yet responded to a request for comment on Wittman’s statement.

Hostile takeovers are not common in European banking, but Spanish bank BBVA shocked markets in May when it made an all-stock bid for domestic rival Banco Sabadell, which rejected the bid.

Opimas’s Marenzi said the German government and unions “are basically looking at this and saying there could be a lot of job losses in the process – and they could be quite large-scale job losses.”

“The other thing is that it might be a bit embarrassing for the country to have Italians coming in and telling us how to run our banks,” he added.

A German government spokesman was contacted by CNBC on Tuesday but did not immediately respond.

German Finance Minister Olaf Scholz has previously pushed for the completion of a European banking union. Conceived in the wake of the 2008 global financial crisis, the European Union’s executive body has announced plans to create a banking union to improve regulation and oversight of lenders across the region.

Craig Coben, former global head of equity capital markets at Bank of America, said the German government would need to find a “good enough” reason to block UniCredit’s move against Commerzbank, warning that it also needed to adhere to the principles of European integration.

“As a practical matter, I think it would be very difficult for UniCredit to buy Commerzbank or reach an agreement without the approval of the German government, but I think Germany needs to find a good reason if it wants to get involved. [or] “If they want to block an approach from UniCredit, the EU should put pressure on them,” Coben said on CNBC’s “Squawk Box Europe” on Tuesday.

“Germany is [EU’s] Signed the single market, single currency, single currency. [the] “This would go against the principles of the banking union, which would block mergers on the grounds of national interest,” he continued.

“And I think that’s really the issue here. [the] What is banking union and what does it mean for the European project?”

Former European Central Bank President Mario Draghi said in a report published earlier this month that the European Union needed hundreds of billions of euros of additional investment to achieve key competitiveness targets.

In his report, Draghi, a former Italian prime minister, also cited an “incomplete” banking union as one of the factors that continues to hinder the competitiveness of the region’s banks.

—CNBC’s April Roach contributed to this report.