UniCredit CEO Rules Out Wave of Europe Bank M&A Amid Hurdles

(Bloomberg) -- UniCredit SpA Chief Executive Officer Jean Pierre Mustier is ruling out a wave of transactions among European lenders given the hurdles to deals, his latest comments to downplay reports that the lender may be interested in Commerzbank.

“Mergers in Europe will be very difficult to put together because there is a lot of things which need to be followed: costs need to be controlled, capital needs to be matched, execution risks and governance need to be appropriate,” Mustier, 58, said in a Bloomberg Television interview with Francine Lacqua on Monday. There “will not be many mergers in Europe in the foreseeable future. Domestic and cross-border.”

UniCredit is among European lenders seen as a possible suitor for Commerzbank AG after the German lender’s merger talks with Deutsche Bank AG ended without a deal last month. The Milan-based lender was among banks that had reached out in the past to the German government about a possible bid for Commerzbank AG, people familiar with the matter have said.

Mustier has reiterated that the bank’s strategic plan expiring this year is based on organic growth, though the bank has hinted in the past that it may consider other options in the future.

“It’s important for us to grow on purely organic basis, that’s what we do for our plan,” Mustier said, declining to comment on what he said were “rumors and speculation.”

UniCredit fell 1.4 percent to 11.05 euros as of 11:11 a.m., giving the bank a market value of 24.7 billion euros ($27.7 billion.) The shares have gained about 12 percent this year compared with a 5 percent increase of the 47-member STOXX Europe 600 Banks Index.

After exceeding plans for cost-cutting and asset quality, Mustier is preparing to take his next set of targets to investors. UniCredit has already said that it expects to accelerate the run down of non-essential business, adjust its holdings of Italian sovereign debt and improve its capital buffer. As part of the measures, the bank last week sold a 17 percent stake in FinecoBank SpA, raising more than 1 billion euros.

Risk Portfolio

The measures are aimed at helping the bank improve its risk portfolio and capital, boost lending and give it more flexibility to increase UniCredit’s dividend payout “which is what our shareholders are looking at,” Mustier said.

Mustier spent the first part of his tenure focused on cleaning up bad loans, cutting jobs and strengthening the balance sheet. The bank has eliminated more positions than planned and achieved 95 percent of its expected branch closures. It expects to exceed its targets for both those efforts for this year and it confirmed all other goals for 2019.

Its plan to be announced in December will focus on the strategic changes to the bank’s network to be more efficient with clients, the CEO said, adding that “every European country where we are present is strategic for us.”

--With assistance from Flavia Rotondi.

To contact the reporter on this story: Sonia Sirletti in Milan at ssirletti@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Marco Bertacche

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