HVB in merger talks with UniCredito Italiano

30 May 2005

MUNICH – German banking group HypoVereinsbank (HVB) confirmed on Monday that it is now discussing a possible merger with the Italian institute UniCredito Italiano in what industry analysts said could start a reshaping of Germany’s bank landscape.

The statement, coming after a long period of speculation and rumours about HVB being targeted for a takeover, said that so far no agreement had been reached and that the outcome was still open.

On the Frankfurt Stock Exchange, HVB shares posted solid gains, while those of Commerzbank surged by over 3.6 percent amid renewed speculation that the bank could now again become a takeover target.

“UniCredito Italiano and HVB Group confirm that they are in discussions regarding a potential business combination. No agreement has been reached yet and the outcome of the discussions is still subject to considerable uncertainty,” said the investor-relations statement posted on the HVB website.

“The parties do not intend to make further comments.”

Industry analysts said that UniCredito is aiming for a majority stake in HVB, with the Italian institute particularly attracted by the Munich bank’s strong business operations in Eastern Europe.

UniCredito itself is strongly involved in Eastern Europe, so that the combined with HVB the bank could become the top foreign bank in the region, they said.

HVB chairman Deiter Rampl himself had helped to fuel the speculation about a linkup with UniCredito, with comments indicating that an alliance with the Italian institute would make strategic sense and that HVB could settle for a role as a junior partner.

HVB suffered total losses of around EUR 6 billion in the three-year period 2002 to 2004 amid asset writedowns and non-performing loans, but is aiming for a turnaround this year with a profit target of EUR 1 billion.

UniCredito was Italy’s most profitable bank last year, with profits rising 9 percent to EUR 2.13 billion.

HVB’s market value is currently around EUR 15 billion, while UniCredito, though smaller than the German bank, has a market worth put at over EUR 26 billion.

On the Frankfurt Stock Exchange, HVB shares were running about 0.70 percent higher at EUR 20.38 by late morning. The bank’s shares had posted steady gains in recent sessions amid the persistent speculation about HVB being targeted for takeover.

A merger of UniCredito and HVB would be the biggest ever on the European continent, with German banking industry experts saying it could trigger new shifts in the finance industry landscape.

Wolfgang Gerke, professor of banking at Erlangen-Nuremberg University, said the possible merger could be a signal for further inroads by foreign banks in Germany. He said German banks are undervalued on the stock market while the German market remains an attractive one for large international banks.

In Frankfurt, Commerzbank said it expected further attempts by foreign banks to target German banks for takeovers, but that Commerzbank itself does not expect to be one of the targets.

“Many a further European institute will have thoughts about how to become involved in the attractive German market,” Commerzbank spokesman Peter Pietsch told Deutsche Presse-Agentur.

He noted that bank chairman Klaus-Peter Mueller had told the recent annual shareholders session that Commerzbank had positioned itself as an independent institute capable of standing on its own two feet in the future.

But a report by the Wall Street Journal Europe on Monday said Commerzbank could become a target, and said possible interested buyers were Deutsche Bank, Royal Bank of Scotland, BNP Paribas and Societe Generale.

On the Frankfurt Stock Exchange, Commerzbank shares were running 3.62 percent higher, at EUR 17.77, shortly before noontime.

DPA

Subject: German news