By Elena Vardon

Commerzbank gave a strategy update signaling its aim of remaining independent ahead of talks with Italy's UniCredit, which has flagged its interest in a tie-up.

The board of Commerzbank, Germany's leading lender for small and medium-sized companies, said it is working to improve profitability and boost shareholder returns in the coming years, confirming the strategy it outlined in November.

"Commerzbank is continuously expanding its independent position as a strong pillar in the German banking market and a reliable partner to the domestic economy," Chair Jens Weidmann said.

The update comes after the board's annual strategy retreat and ahead of a first round of talks with UniCredit, the Italian bank that has moved to build up a 21% stake in Commerzbank, overtaking the German government as its largest stakeholder.

The move revived speculation that UniCredit could pursue a takeover of Commerzbank and raised concerns among German officials and union leaders, who say an acquisition could cut jobs, cede financial clout to Italy and deprive German businesses of funding.

Speaking at a financial conference, Commerzbank's designated chief executive said a first meeting between the banks on Friday is a starting point.

"UniCredit is now a shareholder and investor and it's very normal that you exchange views," Bettina Orlopp said. Orlopp, until now Commerzbank's finance chief, is set to become CEO next week, succeeding Manfred Knof.

Orlopp said management would stay open minded and evaluate the options to see whether value for shareholders can be created, and highlighted the need to put stability into the situation.

"We will not do any stupid things... Any idea of now doing some crazy acquisitions or fast selldowns, etcetera--not with us. We won't do that," she added.

Shares in Commerzbank traded over 5% higher Thursday morning, at around 16 euros--their highest price since 2012.

UniCredit's CEO Andrea Orcel said on Wednesday that all scenarios were open regarding its investment in Commerzbank. Orcel has signaled an appetite for deals and is eager to create a counterweight to the U.S. megabanks but cautioned that a transaction would only be pursued if there is broad support from stakeholders.

Commerzbank raised its net profit forecast for 2027 to 3.6 billion euros ($4.01 billion) from previous guidance of 3.4 billion euros. It also lifted its return on tangible equity view to more than 12% by 2027, against its previous target of over 11%.

The lender aims to pay out more than 90% of net profits to shareholders--subject to regulatory approvals--for 2025, 2026 and 2027, an increase from this year's goal of over 70% ratio.

Write to Elena Vardon at elena.vardon@wsj.com

(END) Dow Jones Newswires

September 26, 2024 06:27 ET (10:27 GMT)

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