Finance
UniCredit and Commerzbank square off with target hikes
The logo of German bank Commerzbank seen on a branch office near the Commerzbank Tower in Frankfurt.
Daniel Roland | Afp | Getty Images
Two months since UniCredit played its opening move to woo German lender Commerzbank, the lenders flaunted their financial strength as one of Europe’s largest banking mergers still hangs in balance.
Both banks reported third-quarter results on Wednesday, with UniCredit posting an 8% year-on-year hike in net profit to 2.5 billion euros ($2.25 billion), compared with a Reuters-reported 2.27-billion euro forecast. It raised its full-year net profit guidance to above 9 billion euros, from a previous outlook of 8.5 billion euros.
For its part, Commerzbank revealed a 6.2% drop in net profit to 642 million euros in the third quarter amid a broader drop in net interest income and higher risk provisions. The lender nevertheless said it has lifted its 2024 expectations for net interest and net commissions income, and confirmed its full-year forecast of achieving a net result of 2.4 billion euro, compared with 2.2 billion euros in 2023.
Speaking to CNBC’s Annette Weisbach, Commerzbank CEO Bettina Orlopp said the bank experienced a “very good quarter,” while acknowledging a clear impact on business from lower interest rates in Europe.
She stressed that Commerzbank was on a path of raising its share value through a blend of capital return and higher profitability and the expediency with which the lender hits its targets.
“We have a very good strategy in place, which is also delivering,” she said — as markets watch for whether the bank will assume a defense strategy to fend off takeover interest.
Commerzbank has so far shied from UniCredit’s courtship. When the Italian lender showed its hand by using derivatives to build a potential 21% stake in Commerzbank, the German lender appointed a new CEO and sharpened its financial targets. On Monday, the German bank said it had received regulatory approval to buy back 600 million euros ($653 million) in shares, due to kick off after the Wednesday earnings report and complete by the middle of February.
Yet Orlopp told CNBC that Commerzbank was not intrinsically opposed to a merger:
“We have nothing to be against, because there is nothing on the table. That’s very important to note. And we also always said we would be very open to discuss, if they had something coming on the table, we will carefully review that with our own standalone strategy and see where we can create more values in the interest of our stakeholders,” she said.
The German government has yet to bless the potential union, with Chancellor Olaf Scholz slamming that “unfriendly attacks, hostile takeovers are not a good thing for banks,” in late-September comments carried by Reuters.
The largest shareholder of Commerzbank, the Berlin administration retains a 12% stake after rescuing the lender during the 2008 financial crisis and divesting 4.5% of its initial position in early September.
But a potential schism at home could waylay Scholz’s ruling alliance from closely supervising the transaction, with coalition members due to hold scheduled talks later on Wednesday.
“Let’s put it this way: we wouldn’t be here if we hadn’t been invited to buy that stake. And it all started in a way that we thought was constructive,” UniCredit CEO Andrea Orcel told CNBC’s Charlotte Reed on Wednesday. CNBC has reached out to the German Ministry of Finance for comment.
Appetite for large European cross-border bank mergers has simmered since the controversial 2007 takeover and later evisceration of Dutch lender ABN Amro by a consortium led by the Royal Bank of Scotland — which brought both banks to collapse during the financial crisis. UniCredit CEO Andrea Orcel, then a senior investment banker at Merril Lynch, advised on the ABN Amro transaction — and has once more turned his eye to international ventures, after the Italian lender walked away from a domestic deal to acquire the world’s oldest bank, Monte dei Paschi, in 2021.
UniCredit is already present in Germany through its HypoVereinsbank branch — which Orcel said he sees, alongside Commerzbank, as “two mirror images.”
Last year, UniCredit purchased a nearly 9% stake of Greece’s Alpha Bank from the state-owned Hellenic Financial Stability Fund. On Tuesday, the Italian lender announced it completed acquiring a majority 90.1% interest in Alpha Bank’s Romanian business and plans to complete absorbing the entity in the second half of 2025.
With a common equity tier 1 ratio (CET 1) — a measure of a bank’s strength and resilience — above 16% in the first three quarters of this year, UniCredit appears equipped to weather the strain of a takeover. Last week, Fitch Ratings upgraded its rating on UniCredit’s long-term debt to BBB+ — just above the BBB grade of Italy’s sovereign bonds — citing the lender’s “multi-year long restructuring, balance sheet de-risking and materially improved loss absorption capacity.”
The ratings company noted that UniCredit’s acquisition of a 21% stake in Commerzbank had had no “immediate effect” on its ratings.
Orcel brushed off the exposure risks associated with its stake build in the German lender and a potential takeover:
“Our CET1 is a lot higher than the one Commerzbank has, [but] we need to look at liquidity, we need to look at everything else, like rating agencies. At the end of the day, I don’t think there is a concern there. If there was, we would know about it before we ever had moved,” Orcel noted, stressing UniCredit’s record in Germany:
“Unicredit went through a real difficult time through the [financial] crisis,” he said. “At no time did we squeeze Germany, at no time did we repatriate capital or liquidity from Germany, at no time did we ask for government support. Something that Commerzbank had to do.”
But the deal is not yet done — and Orcel said UniCredit will only march ahead “if it gives us the returns out investors expect, actually, they need to improve those returns meaningfully.”
Cybersecurity and enterprise software stocks have been market dogs in 2026, with fears that AI will wipe out a wide range of companies in the enterprise space dominating the narrative. But they snapped a brutal losing streak this past week, joining in the broader market rally that saw all losses from the U.S.-Iran war regained by the Dow Jones Industrial Average and S&P 500.
Cybersecurity has been “a victim of some of the AI-related headlines,” Christian Magoon, Amplify ETFs CEO, said on this week’s “ETF Edge.”
It wasn’t just niche cybersecurity names. Take Microsoft, for example, which was recently down close to 20% for the year. Its shares surged last week by 13%.
A big driver of the pummeling in software stocks was a rotation within tech by investors to AI infrastructure and semiconductors and some other names in large-cap tech, Magoon said, and since cybersecurity stocks and ETFs are heavily weighted towards software companies, they were left behind even as those businesses continue to grow on a fundamental basis.
But Wall Street now has become more bullish with the stocks at lower levels. Brent Thill, Jefferies tech analyst, said last week that the worst may be over for software stocks. “I think that this concept that software is dead, and then Anthropic and OpenAI are going to kill the entire industry, is just over-exaggerated,” he said on CNBC’s “Money Movers” on Wednesday.
“Big Short” investor Michael Burry wrote in a Substack post on Wednesday that he is becoming bullish about software stocks after the recent selloff. “Software stocks remain interesting because of accelerated extreme declines last week arising from a reflexive positive feedback loop between falling software stocks and changes in the market for their bank debt,” he wrote.
The Global X Cybersecurity ETF (BUG), is down about 12% since the beginning of the year, with top holdings including Palo Alto Networks, Fortinet, Akamai Technologies and CrowdStrike. But BUG was up 12% last week. The First Trust NASDAQ Cybersecurity ETF (CIBR) is down 6% for the year, but up 9% in the past week.
Piper Sandler analyst Rob Owens reiterated an “overweight” rating on Palo Alto Networks which helped the stock pop 7% — it is now down roughly 6% on the year. Its peers saw similar moves, including CrowdStrike.
Performance of Global X cybersecurity ETF versus S&P 500 over past one-year period.
Magoon said expectations may have become too high in cybersecurity, and with a crowding effect among investors, solid results were not enough to to push stocks higher. But the down-and-then-back-up 2026 for the sector is also a reminder that when stocks fall sharply in a short period of time, opportunity may knock.
“Once you’re down over 10% in some of these subsectors, you start to see the contrarians start to say, ‘well, maybe I’ll take a look at this,'” Magoon said.
He said AI does add both opportunity and uncertainty to the cybersecurity equation, increasing demand but also introducing new competition. But he added, “I think the dip is good to buy in an AI-driven world,” specifically because the risks to companies may lead to more M&A in cyber names that benefits the stocks.
For now, investors may look for opportunity on the margins rather than rush back into beaten-up tech names. “I think investors are still going to remain underweight software,” Thill said.
But Magoon advises investors to at least take the reminder to keep an eye on niches in the market during pronounced downturns. “The best-performing are often the least bought and do the best over the next 12 months versus late-in-the-game piling on,” he said.
While that may have been a mindset that worked against the last investors into cybersecurity and enterprise software in mid-2025 when the negative sentiment started building, at least for now, it’s started working for the stocks in the sector again.
Meanwhile, this year’s biggest winner is also a good example of what can be an extended trade in either a bullish or bearish direction. Last year, institutional ownership of energy was at multi-year lows, Magoon said, referencing Bank of America data. “Reverse sentiment can be a great indicator,” he said.
But he cautioned that any selective buying of stocks that have dipped does have to contend with the risk that there is a potentially bigger drawdown in the market yet to come in 2026. That is because midterm election years historically have been marked by large drawdowns. “If you think it is bad right now, it could get a lot worse,” Magoon said. But he added that there’s a silver-lining in that data, too, for the patient investor. The market has posted very strong 12-month returns after midterm election drawdowns end. So, for investors with a longer-term time horizon and no need for short-term liquidity, Magoon said, “stick in there.”
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New innovation in the exchange-traded fund industry could come at a cost to investors during extreme conditions.
According to MFS Investment Management’s Jamie Harrison, ETFs involved in increasingly complex derivatives and less transparent markets may be in uncharted territory when it comes to violent downturns.
“Those would be something that you’d want to keep an eye on as volatility ramps up,” the firm’s head of ETF capital markets told CNBC’s “ETF Edge” this week. “As innovation continues to increase at a rapid pace within the ETF wrapper, [it’s] definitely something that we advise our clients to be really front-footed about… Lack of transparency could absolutely be an issue if we’re going to start seeing some deep sell-offs.”
His firm has been around since 1924 and is known for inventing the open-end mutual fund. Last year, ETF.com named MFS Investment Management as the best new ETF issuer.
“It’s important to do due diligence on the portfolio,” he said. “Having a firm that has deep partnerships, deep bench of subject matter experts that plays with the A-team in terms of the Street and liquidity providers available [are] super important.”
Liquidity as the real issue?
Harrison suggested the real issue is liquidity, particularly during a steep sell-off.
“We’ve all seen the news and the headlines around potential private credit ETFs. That picture becomes much more murky,” he added. “It’s up to advisors, to investors [and] to clients to really dig in and look under the hood and engage with their issuers.”
He noted investors will have to ask some tough questions.
“What does this look like in a 20% drawdown? How does this liquidity facility work? Am I going to be able to get in? Am I going to be able to get out? And if I’m able to get out, am I able to get out at a price that’s tight to NAV [net asset value], and what’s the infrastructure at your shop in terms of managing that consideration for me,” said Harrison.
Amplify ETFs’ Christian Magoon is also concerned about these newer ETF strategies could weather a monster drawdown. He listed private credit as a red flag.
“If your ETF owns private credit, I think it’s worth taking a look at, kind of what the standards are around liquidity and how that ETF is trading, because that should be a bit of a mismatch between the trading pace of ETFs and the underlying asset,” the firm’s CEO said in the same interview.
Magoon also highlighted potential issues surrounding equity-linked notes. The notes provide fixed income security while offering potentially higher returns linked to stocks or equity indexes.
“Those could potentially be in stress due to redemptions and the underlying credit risk. That’s another kind of unique derivative,” Magoon said. “I would very closely look at any ETF that has equity-linked notes should we get into a major drawdown or there be a contagion in private credit or something related to the banking system.”
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