Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: The German Chancellor says his government is against hostile and
Speaker 2: aggressive tactics in the country's banking sector. Fredrich Meers was
Speaker 2: speaking to industry executives after Commerce Bank formally rejected unicredits
Speaker 2: takeover bid, saying it lacks value and underminds of trust
Speaker 2: with us now for an exclusive conversation. Is the chief
Speaker 2: executive of UniCredit Andre Orchell Andre, thank you so much
Speaker 2: for joining us. Bettina or Lop, the chief executive of
Speaker 2: Commerce Bank, dismiss this as a speculative attempt to dismantle
Speaker 2: commerce bank successful business model. How do you respond to
Speaker 2: that and does it definitely close any room for negotiation?
Speaker 3: Thank you, friend sein Well.
Speaker 1: From our standpoint, we have been consistently trying to engage
Speaker 1: in a meaningful dialogue to review facts as opposed to statements,
Speaker 1: but we do not believe our back by facts. As
Speaker 1: a shareholder, we feel very strongly that we need to
Speaker 1: be ambitious. We have demonstrated at unique credit and we
Speaker 1: think Commerce Bank can express a lot more value than
Speaker 1: it does at the moment, both for its shareholders but
Speaker 1: also for its employees and the clients it search Furthermore,
Speaker 1: we do think that the current plan puts Commerce Bank
Speaker 1: at risk in the medium term to face a competitive environment,
Speaker 1: to face risk that would require yet another restructuring plan
Speaker 1: and a difficult one, or put the entire bank at risks.
Speaker 1: For that genuine concern, we have put our views forward
Speaker 1: yesterday after failing to have any meaningful engagement, and as
Speaker 1: you know on May sevens. On April seventh, Commerce Bank
Speaker 1: was very clear that they remained on their position that
Speaker 1: the bank needed to remain independent and that there was
Speaker 1: no value and refuse any further engagement with us.
Speaker 2: So where does that leave you? Across border bank deals
Speaker 2: often proceed without management support, but rarely do they proceed
Speaker 2: without government support, or at least the government saying actually,
Speaker 2: this doesn't work for them. Are you prepared to move
Speaker 2: forward without political support? In Germany?
Speaker 3: So I hear a lot about this is a cross
Speaker 3: border deal, but.
Speaker 1: This is effectively mostly a merger between the second and
Speaker 1: third largest bank in Germany.
Speaker 3: And if you look.
Speaker 1: At the views we provided yesterday, most if not all,
Speaker 1: of the value comes from the merger of two separate
Speaker 1: second and third banks in Germany. So it is an
Speaker 1: in market deal. It is not a cross border deal.
Speaker 1: Obviously the group is ban European and the group would
Speaker 1: incorporate that bank into the broader group, but it is
Speaker 1: an in market merger. With respect to the situation and
Speaker 1: the position of everybody, we believe we've been very respectful
Speaker 1: for eighteen months. We both mistake in an auction transparently.
Speaker 1: We reached thirty percent. We tried to engage for eighteen months.
Speaker 1: We launched an offer. We tried to engage within the
Speaker 1: offer to land a joint plan in the best interest
Speaker 1: of everybody. We were dismissed after two weeks with a
Speaker 1: refusal to engage on any detail, and therefore we have
Speaker 1: no other option but to present our views publicly, given
Speaker 1: that we have an offer document and we need to
Speaker 1: explain what is in that offer document. Commerce Bank was
Speaker 1: well aware that if we did not present a joint plan,
Speaker 1: we would have had to come back with a plan
Speaker 1: from our side, and we restricted that just to our
Speaker 1: views to provide a basis for further engagement. If that
Speaker 1: further engagement occurs, we would welcome it. If it doesn't,
Speaker 1: it is now up to the seventy percent shareholders beyond
Speaker 1: us to take a view whether they want to remain
Speaker 1: in Commerce Bank with the current premises, or whether they
Speaker 1: want to do something else. For UniCredit as a shareholder,
Speaker 1: we have a win win. If we land below control,
Speaker 1: this is the scenario that will provide us with the
Speaker 1: absolute best returns and in our opinion, will provide an
Speaker 1: opportunity to do a deal further down the line at
Speaker 1: much better terms. If instead we get a landslide and
Speaker 1: we reach control, then we will implement the views that
Speaker 1: we have put.
Speaker 3: Forward, views that we have already successfully.
Speaker 1: Implemented at HVP and across thirteen banks in UNI Credit Group,
Speaker 1: and we will create value above the cost of equity.
Speaker 1: So from our standpoint, we've done everything we needed to
Speaker 1: do in order to be in a position to led
Speaker 1: shareholders and indeed the other stakeholder of Commerce Bank make
Speaker 1: a decision.
Speaker 2: We reported last week that these is considering to require
Speaker 2: you to consolidate Commerce Bank. So how likely is that
Speaker 2: to happen If your stake rises above thirty percent but
Speaker 2: stays below fifty percent, would that impact your capital buffer?
Speaker 1: Look, the control is a topic that is interpreted differently
Speaker 1: in Europe. As many other things, in some jurisdiction you
Speaker 1: need to be above fifty plus one. This is, for example,
Speaker 1: the case of Poland. In other jurisdiction you need to
Speaker 1: demonstrate structural control of a shareholder meeting. This in fact
Speaker 1: is the case in Germany. So for us to reach control,
Speaker 1: we would need to demonstrate structural control of the AGM
Speaker 1: of Commerce Bank, something that.
Speaker 3: We can manage very easily.
Speaker 1: Not to do so we will have really two scenarios,
Speaker 1: one where we don't have control and we go back
Speaker 1: to status chore, launch our share back and go back
Speaker 1: to full focus on implementing our unlimited plan. You will
Speaker 1: see results of that already in our main fifth results
Speaker 1: and the wait to see what maps up in Commerce Bank.
Speaker 1: With respect to the impacts on capital, we have been
Speaker 1: very clear. A one hundred percent deal impacts about two
Speaker 1: hundred business points. A fifty percent deal impacts about two
Speaker 1: hundred buses eighty business points excluding the pull to part,
Speaker 1: so it's eighty business points more. That affects our returns.
Speaker 1: But in terms of capital position, we have enough capital
Speaker 1: to absorb both.
Speaker 2: What would be the trigger point so you know, once
Speaker 2: you cross after crossing that thirty percent threshold, what's the
Speaker 2: trigger point then launching a full takeover offer.
Speaker 3: So let's be very clear.
Speaker 1: In Germany, we have a ready offered for one hundred percent,
Speaker 1: so differently from average jazisdictions, as we have offered to
Speaker 1: buy up to one hundred percent of the capital of
Speaker 1: Commerce Bank. If we cross the thirty percent in this offer,
Speaker 1: we're no longer obliged to offer to do any other
Speaker 1: offer and can freely buy in the open market as
Speaker 1: much as we want all the way up to one
Speaker 1: hundred percent without ever launching another offer. So if we
Speaker 1: cross thirty percent and remain below control, it will be
Speaker 1: our decision if and when we want to increase that
Speaker 1: participation to reach control and to move up and for
Speaker 1: the time being a signal clearly yesterday, but after trying
Speaker 1: this other step to bridge the gap that exists between
Speaker 1: US and Commerce Bank, i e. Launching an offer, if
Speaker 1: we do not reach control, we will take a post
Speaker 1: and we will focus on other topics that you have internally.
Speaker 2: I mean, at this point, with what you know now,
Speaker 2: how many investors from Commerce Bank do you think we'll
Speaker 2: accept the offer? What's your base case or your baseline?
Speaker 1: I normally don't speculate and I use facts. Probably that's
Speaker 1: why I am conscious when I say some things. In
Speaker 1: my opinion, it is up to that seventy percent to
Speaker 1: take a view. We have shown very clearly what is
Speaker 1: the financial case to tender. We have put forward our
Speaker 1: views the value we can create, and there is now
Speaker 1: no doubt that we can create substantial more value than
Speaker 1: what is in momentum, and even more if we reach
Speaker 1: a combination. The numbers are not challengeable because they emerge
Speaker 1: directly from what we have already done at HVB and
Speaker 1: across UNI created in last for years. So it's our blueprint.
Speaker 1: We know how to implement it. We will implement it,
Speaker 1: we will extract those value. We know what we're talking about,
Speaker 1: So it's only about that the shareholders will need to
Speaker 1: decide whether they believe waiting is better for them or
Speaker 1: tandering is better for them, and I guess we will
Speaker 1: not know that until the very end of the offer.
Speaker 1: But as I said, for us, we have reached thirty
Speaker 1: We've tried to engage for eighteen months. We launched an
Speaker 1: offer in order to have an opportunity for a meaningful,
Speaker 1: transparent engagement to address a lot of a topic that
Speaker 1: are now being front at us that so far has failed.
Speaker 1: Commerce Bank has remained on the position of day one
Speaker 1: and refuses to look at any other alternatives. So shareholders
Speaker 1: are now aware of our views, of the risks, of
Speaker 1: the possibilities, and we're in a position to take a view,
Speaker 1: and for the time being we're here. We would be
Speaker 1: very glad to engage constructively. But if that is not possible,
Speaker 1: the offer will run its course and we will see
Speaker 1: where we are at the end of the offer.
Speaker 2: Andrew Rochelle, your proposals to boost commerce bank standalone profitability
Speaker 2: are around strong cuts to the bank's international operations. But
Speaker 2: Commerce Bank is also an important source of trade finance
Speaker 2: for a lot of the German exporting countries. So do
Speaker 2: you think that could be a problem for those clients.
Speaker 1: No, I don't. This is another piece of misinformation. UniCredit
Speaker 1: has a trade finance business that is about one point
Speaker 1: six billion. This is double the trade finance business of
Speaker 1: Commerce Bank. We support that trade finance business with twenty
Speaker 1: offices around the world. Our service is fully automated, we
Speaker 1: use AI and we have a level of service that
Speaker 1: gets recognized broadly. Commerce Bank has half the business, more
Speaker 1: than one hundred offices which are a mixed and match
Speaker 1: between trade finance and other activities such as trading hubs,
Speaker 1: local lending to local companies that have nothing to do
Speaker 1: with the core business of a German and indeed the
Speaker 1: Polish bank. So for US, trade finance is a core business.
Speaker 1: It is a core business from which we are recognized
Speaker 1: and we keep on winning prizes every year for best
Speaker 1: service in that business. So the last thing we would
Speaker 1: want to do is affecting any way the middle stand
Speaker 1: access to our trade finance and correspondent banking services across
Speaker 1: the globe. Indeed, those services are much more efficient, much
Speaker 1: more effective, and better services than the one of banks
Speaker 1: that use the old model that we believe Commerce Bank uses.
Speaker 2: You're predicting seven thousand job cuts at Commerce Bank if
Speaker 2: those plans come to fruition. Is that what unions? So
Speaker 2: the governments are worried about this deal.
Speaker 1: Well, on the job cuts, I would say that the
Speaker 1: numbers that were again flying around talked about fifteen thousand,
Speaker 1: So number one is less than half Number two. Commerce
Speaker 1: Bank itself has already committed to cut four thousand jobs,
Speaker 1: all in Germany, hiring internationally and redeploying head count outside
Speaker 1: of Germany. So put that in context with our seven thousand,
Speaker 1: which would be done mostly the first five thousands or
Speaker 1: so over a period of three to four years. The
Speaker 1: remaining just in the combination. You're talking four or five
Speaker 1: six years out. Very significant attrition given the period of age,
Speaker 1: and there is significant reinvestment, and a number of those
Speaker 1: reductions are done in areas that are very bureauctic and
Speaker 1: overpaid in our opinion, and that need addressing at the
Speaker 1: center of function that Commerce Bank has. So are their
Speaker 1: job cuts, yes, they are. I don't think they're meaningfully
Speaker 1: different from what Commerce Bank has proposed. And those job
Speaker 1: cuts are not done to go and expand internationally and
Speaker 1: lend in other countries, but they are done to strengthen
Speaker 1: the business in Germany by investing more in technology in
Speaker 1: AI and redesigning the entire operating machine. The very big
Speaker 1: difference between Momentum and Unlocked is that Momentum at the
Speaker 1: end of the plan delivers a bank that, after they
Speaker 1: have done those cuts, is still lagging the other peers
Speaker 1: in Germany and in Europe. Unlocked at the end of
Speaker 1: the plan delivers a bank that is a leader versus
Speaker 1: the other German competitors and Europe. So Unlocked is viable
Speaker 1: momentum will just require yet another restructuring plan to address
Speaker 1: the gap that would be accumulated again in the next
Speaker 1: three years, to visa viva.
Speaker 2: Sector Andre, Do you think there's a chance actually that
Speaker 2: the government, you know, the German government comes out and
Speaker 2: just blocks it like it to this government did with
Speaker 2: Manco BPM.
Speaker 1: I cannot speculate on what the government will or will
Speaker 1: not do. I respect their position. I would have hoped
Speaker 1: we could have had engagement to explain every topic and
Speaker 1: every step in detail and argue your case, something that
Speaker 1: we have unable to do.
Speaker 3: But it is very decision to make.
Speaker 2: You know what you're thinking about acquisitions in Italy. Are
Speaker 2: you still evaluating something, for example with Monte Pasci.
Speaker 1: Look, I think our name comes very often in acquisition,
Speaker 1: probably for two reasons, one because of my past job
Speaker 1: and two because uniqu credit being present in thirteen countries
Speaker 1: and having turned around in the way we have turned around,
Speaker 1: there is a lot of speculation that we may do
Speaker 1: a lot of things. So, as I said, and I
Speaker 1: continue to say, we are very committed and we have
Speaker 1: demonstrated it again and again and again to our organic growth.
Speaker 1: Initially we've unlocked now we've Unlimited. Those two plans have
Speaker 1: delivered a lot more value, and then Unlimited will deliver
Speaker 1: a lot more value than any acquisition. That said, I
Speaker 1: think it is the duty of the leadership of Unique
Speaker 1: Credit to look at option.
Speaker 3: In Italy.
Speaker 1: We have a nine point nine percent market share of
Speaker 1: the market. The market is fragmented, so there is basis
Speaker 1: to look at option to strengthen our market share. There
Speaker 1: is basis, but we need to find opportunities that work,
Speaker 1: and we need to find opportunities that fulfill our financial
Speaker 1: We're very, very disciplined on the returns to be had
Speaker 1: and given the success of Unlocked and what I will
Speaker 1: demonstrate the success of Unlimited in the next twenty quarters,
Speaker 1: we do not need to make acquisition. We will do
Speaker 1: them only if they ad incremental value.
Speaker 2: Andrew Archill, thank you so much as ever for giving
Speaker 2: us a little bit of time in your very busy squasule.
Speaker 2: That was the UniCredit Chief executive