Unicredit has increased its direct shareholding in Germany’s second-largest bank to around 26 percent. The remaining financial instruments are to be converted into shares «in due course.» As a result, the stake is expected to rise to about 29 percent, according to a statement released on Monday.

With this, Unicredit is consolidating its position as Commerzbank’s largest single shareholder, the statement continued. The group does not currently intend to seek representation on the supervisory board. However, it will continue to closely monitor Commerzbank’s progress in sustainably strengthening its business and creating value for shareholders, customers, and employees.

The rise in Commerzbank’s share price also has an impact on Unicredit’s CET1 ratio. With a voting stake of around 29 percent, this has increased to around 145 basis points from the previous 110 basis points, the bank said. It also referred to the restructuring of derivative hedging to reduce future profit and loss volatility. The return on capital was reaffirmed at around 20 percent.

Significant Value Created

«To date, our investment has exceeded our financial expectations and thereby created significant value for UniCredit shareholders. We are confident that this positive trend will continue,» the statement added.

Unicredit had received approval from the European Central Bank, the German antitrust authorities, and the U.S. Federal Reserve to expand its stake to nearly 29 percent.

Around a year ago, under Chief Executive Officer Andrea Orcel, the bank took advantage of the German state’s partial exit from Commerzbank and secured a 4,5 percent stake. This was subsequently increased to 9,5 percent through further purchases on the market, with an additional 18,5 percent controlled via financial instruments.

Resistance from Management and Politics

A potential takeover has met with resistance from Commerzbank’s management and German politicians. The board and works council have repeatedly described the Italians’ approach as «hostile.» Orcel had stated that the bank might wait until 2027 before making a full takeover offer.

If the 30 percent threshold is exceeded, Unicredit would be legally required to submit a formal purchase offer to the remaining shareholders.

At the beginning of July, Unicredit had already converted about half of the financial instruments into shares, raising its stake to around 20 percent and overtaking the state, which still holds about 12 percent, as Commerzbank’s largest shareholder.

Unicredit is already present in the German market through HypoVereinsbank (HVB).

Cost-Cutting and Capital Returns

Commerzbank’s management, led by CEO Bettina Orlopp, is restructuring the bank and cutting jobs. In the first half of the year, the bank achieved a record operating profit of 2,4 billion euro and raised its outlook for the full year. In addition, the announcement of high dividends and capital returns to shareholders has supported the share price.

This strategy is a double-edged sword. On the one hand, it makes a potential takeover bid by Unicredit significantly more expensive. On the other hand, the Italian group benefits considerably from the increase in value.

Around a year ago, Commerzbank’s share price was about 13 euro. It currently stands at 36,74 euro – an increase of more than 180 percent.