With his finely tailored suits and easy charm, Italian banker Andrea Orcel looks every inch the man ready to reshape Europe’s banking landscape.
The 61-year-old former investment banker, once praised for his “golden Rolodex” of contacts, is currently leading an audacious attempt to position his bank UniCredit for a full-blown takeover of Germany’s state-backed lender Commerzbank.
As Germany’s second-largest lender, Commerzbank is a linchpin in the domestic economy, supporting Germany’s famed Mittelstand companies and employing 42,000 staff. UniCredit, meanwhile, is Italy’s second-largest bank with a significant presence in Germany.
Orcel’s UniCredit stunned German officials and Chancellor Olaf Scholz this month with a surprise announcement that the bank had bought up 9pc of Commerzbank, making it the second-largest shareholder after the German government.
However, that bold move, which caught officials off-guard, now threatens to open up a diplomatic rift between Berlin and Rome.
Tensions have arisen because banks are highly sensitive assets for governments, fuelling anxiety in Berlin about UniCredit’s intentions.
“Banking is a huge part of sovereignty, so enabling foreigners to take over your banking sector is an issue for every country and even more an issue for Germany, which is a strong power with strong ambitions,” says AlphaValue bank analyst David Grinsztajn.
Orcel’s swoop on Commerzbank taps into the current angst in Germany, as the once mighty nation grapples with a raft of economic and political problems such as the rise of the hard-Right AfD and fears of recession.
UniCredit boss Andrea Orcel managed to build up a substantial stake in Commerzbank without Berlin realising - Hollie Adams/Bloomberg
So far, Meloni has kept quiet on the deal but her foreign minister, Antonio Tajani, has praised UniCredit, saying it was “doing well” by targeting Commerzbank.
That is unlike the mood in Berlin, which has moved from surprise to anger, largely owing to the less-than-transparent way that Orcel executed his move.
UniCredit had been quietly buying Commerzbank shares over the summer using financial derivatives, which can help hide the identity of a buyer.
It was then when the German government unveiled a plan to sell a 4.5pc stake in Commerzbank in early September, a legacy holding from when Germany had to bail out the lender during the financial crisis, that Orcel seized his chance and bought the lot.
Yet in an embarrassing twist, German officials were seemingly oblivious to the fact that UniCredit had bought the government’s stake.
Worse still was the fact that UniCredit later revealed it owned another chunk of derivatives that could easily convert into more Commerzbank shares, potentially increasing its stake to 21pc.
The scale of UniCredit’s ambitions is reflected in that it is also said to be seeking approval from the European Central Bank to take its position to 30pc.
“We do not consider this to be an appropriate course of action,” he said earlier this month.
Some analysts have branded Olaf Scholz’s response to UniCredit’s moves a symptom of German economic nationalism - Michael Kappeler/Avalon
To temper the controversy, Orcel has downplayed the spat, saying German policymakers sold the stake to UniCredit because they view the bank as a “reliable and suitable investor” and suggested Berlin was well aware of his intentions.
But other German politicians have been more forceful in their displeasure.
Friedrich Merz, who leads Angela Merkel’s former party CDU and is likely to become the new chancellor next year, described Orcel’s move as “amateur” and blasted any takeover of Commerzbank as a “disaster for Germany’s banking market”.
Scholz’s finance minister, Florian Toncar, also criticised the manoeuvre, saying it was “not wise” to proceed “too aggressively with a large, highly-regulated, complex bank”.
The tone of some of the attacks has reportedly angered Italian government officials in Rome.
Nicolas Veron, a senior fellow at the think tank Bruegel in Brussels, said the pushback in Germany underscored growing anxiety in Berlin about its status on the global stage.
“The virulence of the reaction that you’ve seen just showed the power of economic nationalism in Germany, and especially banking nationalism for that matter,” he says.
“It coalesces with the current angst and unease in Germany about the future of the German business model and German industry and competitiveness.
“If the transaction succeeds in the short term, this will be viewed understandably in Italy as a kind of national success even if the reality is a bit more nuanced.
“But you have something in Germany along the lines of, it comes from Italy so it cannot be professional, it cannot be German quality. That’s very offensive and inappropriate.”
He said similar attacks were launched on Indian businessman Lakshmi Mittal when he tried to buy France’s steelmaker Arcelor in 2006.
At the time, French economy minister Thierry Breton accused him of having a “grammar problem” for mounting a bid.
However, Karel Lannoo, of the Centre for European Policy Studies, says any disagreement between Italy and Germany would remain “on the surface” because both are signed up to the EU single market, which is designed to fuel cross-border deals.
“Politically, it will be hard to swallow, but look at the market share for German cars in Italy. Why would Italy not be allowed to export financial services to Germany? Germany is weak in financial services,” he said, pointing to recent problems at Deutsche Bank.
Meanwhile, financial markets are keeping a close eye on the deal as a possible watershed moment for more cross-border M&A bank transactions.
KBW bank analyst Andy Stimpson said it was a “critical juncture” for Europe’s wider ambitions of an EU banking union, a project pushed by figures such as French president Emmanuel Macron.
“If the German government blocks the deal on the grounds that it is a cross-border deal, I think that sends a very negative message,” he says.
Many point out that UniCredit is already a large domestic player in Germany through its HypoVereinsbank subsidiary, which is the largest bank in Bavaria.
Orcel may be tempted to play up UniCredit’s existing links to Germany and argue that a stronger Commerzbank would benefit the country’s economy.
But as a swashbuckling M&A banker, Orcel has charted a path that puts him on an inevitable collision course with the boring old nature of German retail banking.
“The German approach of banking is very specific,” said Grinsztajn. “Banking is just there to support industry. The German objective is not to focus on finance as an industry and to derive profit from finance.”