(Bloomberg) -- UniCredit SpA said it will start buying as much as €1.7 billion ($1.89 billion) of its own stock, underlining Chief Executive Officer Andrea Orcel’s commitment to an ambitious payout pledge even as he considers a potential acquisition of rival Commerzbank AG.
The buyback comes days after UniCredit unveiled a 9% stake in Commerzbank, with Orcel saying a full takeover is one option he’s considering. The Italian bank paid about €700 million for a 4.5% Commerzbank stake it bought from the German government, with the rest acquired on the market.
UniCredit said at the time the purchase of the stake won’t affect its distribution policy. Orcel has pledged to return €10 billion to shareholders this year, the most among Europe’s top banks, according to filings reviewed by Bloomberg. Despite such payouts, Orcel is still sitting on billions of euros he can deploy for acquisitions, having reaped the benefits of higher interest rates while cutting costs.
UniCredit shares rose 0.2% at 2:45 p.m. in Milan trading on Monday. The stock price is up about 50% this year to date.
In an interview published on Monday, the UniCredit CEO reiterated he’s seeking to play an active role in Commerzbank’s strategy, whether he ends up buying the lender or not. He highlighted UniCredit’s higher profitability in a Bloomberg TV interview last week and announced he’d be presenting fresh ideas to Commerzbank’s management on what to change.
UniCredit would probably be able to maintain its ordinary payout policy after a deal, even if the price was partially paid in cash, Barclays Plc analysts said in a report on Monday. Analysts at the UK bank assumed that UniCredit would be able to make savings equivalent to 30% of Commerzbank’s costs in Germany, citing the Italian firm’s “good track record” with its existing German unit.
The math behind a potential merger could also get a boost from an accounting quirk. A full recognition of so-called badwill could generate book gains by €10.4 billion and offset unrealized losses on Commerzbank’s loan book, Barclays analysts including Paola Sabbione wrote.
UniCredit’s stock buyback will start on Monday and may be completed by November, the Milan-based lender said in a statement. Morgan Stanley will act as a broker and independently decide on the stock purchases.
The ECB, which supervises the bloc’s lenders, has authorized the transaction, UniCredit said earlier this month.
(Updates with analyst comment from sixth paragraph. A previous version of this story corrected the purchase price for the Commerzbank stake.)
©2024 Bloomberg L.P.
