Andrea Orcel, chief executive officer of Unicredit, in London, UK, on Thursday, Nov. 23, 2023.
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Divided between two takeover courtships, UniCredit‘s Andrea Orcel still has room to sweeten his bid for Italy’s Banco BPM, analysts say, while political turmoil stalls a deal with Germany’s Commerzbank.
Once a key architect in the controversial 2007 takeover and later break-up of Dutch bank ABN Amro, Orcel revisited his ambitions for cross-border consolidation with the September announcement of a surprise stake build in Commerzbank. Until recently, the latter had been the subject of speculation as a potential merger partner for Germany’s largest lender, Deutsche Bank.
Amid resistance from the German government — and turbulence in Chancellor Olaf Scholz’s ruling coalition — UniCredit also last month turned its eye to Banco BPM, with a 10 billion-euro ($10.5 billion) offer that the Italian peer said was delivered on “unusual terms” and does not reflect its profitability and growth potential.
Along the way, Orcel drew frowns from the Italian administration, with Economy Minister Giancarlo Giorgetti warning that “the safest way to lose a war is engaging on two fronts,” according to Italian newswire Ansa.
Analysts say that the spurned UniCredit — whose CET1 ratio, reflecting the bank’s financial strength and resilience, stood above 16% in the first three quarters of this year — can still improve its domestic bid.
“There is scope for increasing the [Banco BPM] offer,” Johann Scholtz, senior equity analyst and Morningstar, told CNBC.
However, he warned of “limited” room to do so. “Think more than 10% [increase], you are probably going to dilute shareholder earnings.”
UniCredit’s starting proposal was for an all-stock deal that would merge two of Italy’s largest lenders, but offered just 6.657 euros for each share.
Both Scholtz and Filippo Alloatti, senior credit analyst at Federated Hermes, said that UniCredit could sweeten the proposition by tacking on a cash component.
“Remember, that’s the second attempt from Orcel to buy [Banco] BPM … I don’t think there’ll be a third attempt. I think that either they close [the deal] now, or probably he walks. So I believe a cash component could be on the table,” Alloatti told CNBC. Orcel last month labeled Banco BPM as a “historical target” — stoking the flames of media reports that UniCredit had previously sought a domestic union back in 2022.
The Italian stage was primed for M&A activity early last month, after Banco BPM acquired a 5% holding in Monte dei Paschi — the world’s oldest lender and another former takeover target of UniCredit, until talks collapsed in 2021 — when Rome sought to reduce its stake in the bailed-out bank.
Critically, Scholtz noted, UniCredit’s offer “puts [Banco] BPM into a difficult position,” triggering a passivity rule that impedes it from any action that might hinder the bid without shareholder approval — and could stifle Banco BPM’s own early-November ambitions to acquire control of fund manager Anima Holding, which also owns a 4% stake in Monte dei Paschi.
Offense-defense
A consolidation offensive could be UniCredit’s best defense in an environment of easing interest rates.
“Multi-year long restructuring, balance sheet de-risking and materially improved loss absorption capacity” propelled UniCredit to a BBB+ long-term debt rating from Fitch Ratings in October, above that of Italy’s own sovereign bonds.
But the lender must now contend with an environment of loosening monetary policy, where it is “more exposed to changes in interest rates due to its relatively limited presence in asset management and bancassurance,” Alessandro Boratti, analyst at Scope Ratings, wrote last month.
Both takeover prospects hedge some of that exposure. A Commerzbank union in Germany, where UniCredit operates through its HypoVereinsbank division, could create synergies in capital markets, advisors, payments and trade finance activity, JPMorgan analysts signaled in a November note. They added that such a union would produce a “limited” advantage in funding, as the two banks’ spreads already trade closely.
Closer to home, Scholtz notes, Banco BPM offers complementary strength in asset management. Alloatti said that absorbing a domestic peer is also one of the Italian lender’s only remaining options to take a leading role on the home stage.
“There really isn’t much they can buy in Italy to bridge the gap with [Italy’s largest bank] Intesa. Probably Banco BPM … that’s why they looked at it in the past,” Alloatti said. “Banco BPM is the only bank they could potentially buy to get somewhat closer to Intesa.” Intesa Sanpaolo is currently Italy’s largest bank by total assets.
Approaching Banco BPM, KBW Analyst Hugo Cruz told CNBC in emailed comments, also has the “added value” of signaling to German shareholders that UniCredit has other M&A options available to it. He nevertheless stressed that the domestic acquisition bid is likely “mainly a reaction to the acceleration of the consolidation process in the Italian banking system,” triggered by Banco BPM’s acquisition of its Monte dei Paschi interest.
Orcel may need to decide between going big abroad or staying home, with analysts pointing to high integration costs and an extensive toll on management time if UniCredit attempts to absorb both of its takeover targets.
Ultimately, KBW’s Cruz said, the Italian lender — which notched its 15th consecutive quarter of growth this fall and has seen a roughly 61% hike in its share price in the year to date — can choose to stand alone.
“I don’t think Mr. Orcel has to do a bank acquisition. He already stated that any acquisition will need to add value compared to [UniCredit]’s standalone strategy, and if no acquisition the bank will continue with the same strategy which already included a high level of capital distribution for shareholders and which targeted the usage of excess capital by end of 2027,” he said, noting that the Italian lender abstained from bids previously “because it was still under restructuring and did not have the acquisition currency.”
“We would hope that they would have the discipline to walk away from both deals” if they do not generate return to shareholders, Morningstar’s Scholtz added.
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Check out the companies making headlines before the bell: Meta Platforms — The Facebook and Instagram parent jumped about 3%. Meta cut staff in its Reality Labs division, CNBC reported. Alphabet — The Google and YouTube owner climbed more than 4% after first-quarter results topped Wall Street expectations. Alphabet earned $2.81 per share on $90.23 billion in revenue for the quarter, while analysts surveyed by LSEG had estimated $2.01 per share and $89.12 billion in revenue. T-Mobile — Shares of the telecommunications company fell 5.5% after it reported fewer first-quarter wireless phone subscribers than the Street expected, seeing 495,000 postpaid phone additions versus analysts’ call for 504,000, according to StreetAccount. Earnings and revenue for the first quarter topped Street estimates. Intel — The chipmaker fell 7.2% after the outlook for the current quarter disappointed investors. Intel guided for revenue in the June quarter to come in at $11.8 billion at the midpoint, less than consensus calls for $12.82 billion, according to LSEG. Management anticipates earnings will break even. Intel also announced plans to reduce its operational and capital expenses. Gilead Sciences — The biopharmaceutical stock slid 3.9% after posting first-quarter revenue of $6.67 billion, missing the consensus estimate of $6.81 billion from analysts polled by LSEG. Gilead earned $1.81 per share, excluding items, in the quarter, while Wall Street penciled in $1.79. Skechers — The footwear maker slumped 6% after reporting lower-than-expected first-quarter revenue and withdrew its 2025 forward financial forecasts on account of ” macroeconomic uncertainty stemming from global trade policies .” Skechers’ bottom-line results came in above analysts’ forecasts. Charles Schwab — The financial services provider advanced 1.4% after Goldman Sachs upgraded shares to buy from neutral, calling Schwab a resilient growth stock amid an uncertain backdrop. Hasbro — The toy company rose about 1% one day after soaring 15%. Citigroup raised its investment opinion to buy from neutral, saying Hasbro’s stronger-than-expected Wizards of the Coast business outweighs any uncertainty stemming from tariff policy, according to analyst James Hardiman. Boston Beer — Shares of the Samuel Adams brewer rose nearly 3% after first-quarter results beat expectations. Boston Beer generated $2.16 in earnings per share on $453.9 million of revenue, while analysts surveyed by FactSet looked for 56 cents per share on $435.6 million in revenue. Boston Beer warned in its outlook that tariffs could hurt full-year earnings. — CNBC’s Alex Harring and Jesse Pound contributed reporting. Get Your Ticket to Pro LIVE Join us at the New York Stock Exchange! Uncertain markets? Gain an edge with CNBC Pro LIVE , an exclusive, inaugural event at the historic New York Stock Exchange. In today’s dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12. Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles and Dan Ives, with a special edition of Pro Talks with Tom Lee. You’ll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited!
“I think having that professionally managed portfolio is really beneficial to clients,” Coyne told CNBC’s “ETF Edge” this week. “We’re seeing just… greater volatility [and] uncertainty across both the equity and fixed income markets.“
According to Coyne, the T. Rowe Price Capital Appreciation Equity ETF suits investors who are looking for long-term growth.
“The objective of the fund is to outperform the S&P 500 with lower volatility and greater tax efficiency,” he said. “It’s also a more concentrated portfolio, typically holding around a hundred names.”
The T. Rowe Price Capital Appreciation Equity ETF is down about 5% so far this year while the S&P 500 is off about 7% However, the ETF is up close to 8% over the past year — roughly identical to the S&P 500’s performance.
Coyne notes the T. Rowe Price U.S. Equity Research ETF follows a similar strategy, but with a heavier weighting in top tech stocks.
“This is more of a large-cap growth product [T Rowe Price U.S. Equity Research ETF],” he said. “There are components of characteristics of both passive and active here. This fund is actually managed by our North American directors of research. So again, strong fundamental research is going into the stock selection.”
Both the T. Rowe Price U.S. Equity Research ETF and S&P 500 are down around 7% since the beginning of the year. Meanwhile, the fund is up almost 9% over the past year. That’s less than one percent better than the S&P 500’s performance.
T. Rowe Price U.S. Equity Research ETF vs. S&P 500
‘Some form of bear market’
Strategas Securities’ Todd Sohn thinks investment demand for active managers will continue to be strong.
“This is the type of the environment where it [active management] can actually shine,” the firm’s senior ETF and technical strategist said. “We are in some form of bear market. This is where the active manager really can come into hand and offer their solution they are doing right.”