The merger of Germany's HypoVereinsbank with Italy's Unicredit over the weekend marks the biggest takeover in European history. The fusion thrusts the bank into the lead position in the growing Eastern European market.
Smiling so far: Unicredit's Profumo, left, and HVB's Rampl
In eyeing HypoVereinsbank for a possible takeover, Unicredito's board must have been looking past the Bavarian bank's 2 billion euros in losses last year and lower revenues. They must have been looking east.
Following the takeover of the Bank of Austria in 2000, HypoVereinsbank (HVB), itself the product merger of Bavarian banks in 1998, became sole leader in the new Europe. With Unicredit Banca as its new parent in a stock swap valued at 15.1 billion euros, the new bank will stretch from the Baltics down to Macedonia and Ukraine.
Dominating the east
"We are creating the first truly European bank," said HVB Chief Executive Dieter Rampl on Sunday.
Combined, Germany's number two bank and Italy's number one will reach 28 million customers in 19 European countries. The synergies resulting out of the deal will generate 985 million euros in pre-tax revenue annually, according to reports. Unicredit will also get HVB's Eastern European assets, totalling an estimated 20 billion euros. After the fusion the two banks will be twice as large in the former Eastern bloc as their nearest competitor.
Eastern Europe "is the main goal," in the takeover, said analyst Robert Fürchtl, of Hauck & Aufhäuser.
German workers safe - for now
But profits in the east will come at a price. Up to 9,000 jobs will be lost as a result of the merger, say analysts and union representatives. Unicredit will also take on HVB's debt-laden real estate sector. Analysts wrote ahead of the fusion that Unicredit CEO Alessandro Profumo would have his work cut out for him.
"The most important question is whether Unicredito can improve HVB in Germany," wrote analysts for Citigroup Smith Barney, according to Germany's Frankfurter Allgemeine Zeitung.
At the moment, it seems German government officials won't have to worry about further bad news regarding the country's miserable job market. The job cuts look to take place in Eastern Europe, leaving the 26,000 employees in Germany untouched for now.
More to come?
"I think this will pave the way for further consolidation in European banking," Metehan Sen, an analyst at Sal. Oppenheim, told Reuters.
Cross-border fusions are a relatively new thing in Europe. The takeover last year of Britain's Abbey National by Spain's Santander Central Hispano for 12.5 billion euros was the region's first major fusion. But others are starting to follow.
Dutch banking leader ABN Amro is eager to buy up Italy's Banca Atoniana Popolare Veneta, the country's seventh-largest bank. At the end of March Spain's BBVA completed a 6.4 billion euro takeover of Italy's Banca Natzionale del Livoro.
Foreign banks have been more hesitant in Germany, mainly because the country's top three -- Deutsche Bank, HVB and Commerzbank -- have a less than 20 percent share of the consumer market. A major fusion could change that, prophesized Commerzbank CEO Klaus Peter Müller in an interview with Germany's Focus magazine in April.
"As soon as a foreign bank snaps up a major (German) bank, the offers for others will follow relatively quickly," Müller said. "The race among foreigners after a comprehensive network in Germany will begin."