UniCredit's Andrea Orcel plays a bold hand, with Commerzbank in his sights

UniCredit's CEO Andrea Orcel revealed his hand this week as the Italian lender built a 9% stake in Commerzbank — and a takeover bid for the German rival could still be in the cards.

UniCredit faces a number of hurdles before increasing its stake after filing a request to "potentially exceed 9.9% of Commerzbank if and when necessary." Commerzbank shares soared on Wednesday when news of UniCredit's position was announced, and compounded gains on Thursday following speculation of an imminent takeover.

"All the options are on the table," Orcel said Thursday in a Bloomberg TV interview, stressing that "it's very simple to engage with all the stakeholders and see if the basis for a combination is there. And if it's not, and it is the basis for sponsoring or propelling further Commerzbank in delivering a ... transformation, then we will have delivered a lot of value for our shareholders as well."

Roughly half of UniCredit's freshly acquired stake was purchased from Commerzbank's largest shareholder, the German government, which is seeking to gradually exit its position after injecting 18.2 billion euros ($20.05 billion) to prop up the bank during the 2008 financial crisis. The authorities, which retain a 12% shareholding, last week said that around 13.15 billion euros of the rescue sum had been repaid to date.

All eyes are now on whether UniCredit will make the leap when the German government returns to offload its shares into the market.

"There is the possibility that the government sells down further. We would be interested, at the right terms," Orcel said Thursday. "There is the possibility that we buy in the open market. Or there is the possibility that we do nothing. But unless we ask for the authorization first, we don't have that flexibility."

The Italian bank already has a presence in Germany through its Munich-based lender HypoVereinsbank. In a Thursday note, Berenberg analysts stressed that a Commerzbank takeover would fit with Orcel's broader expansion strategy and create Germany's second-largest bank, with a market share of roughly 8% of customer loans.

"UniCredit has always seen itself as a pan-European bank and its CEO wants this to remain the case," they said. "Expanding its presence in countries where it already has an operation is therefore compatible with this goal."

UniCredit took a similar cross-border step last year, when it purchased a nearly 9% stake of Alpha Bank from the state-owned Hellenic Financial Stability Fund, although it has yet to make any more moves targeting the Greek bank.

Until recently, Germany's largest lender Deutsche Bank had been seen as the prime contender to take over Commerzbank, following an abrupt collapse of initial talks in 2019. Whispers cooled in January, however, when Deutsche Bank CEO Christian Sewing said that merger and acquisition activity was not a priority for the group at the time.

A UniCredit takeover of Commerzbank would emerge as a rare, if long-awaited, instance of consolidation among Europe's banking titans. The resource-intensive and time-consuming process is often stymied by regulatory hurdles and limits on large exposures.

Orcel, however, is angling in on Commerzbank at "probably one of the best moments he could have," according to David Benamou of Axiom Alternative Investments.

"It's a fantastic move, financially," Benamou told CNBC's Steve Sedgwick on Thursday.

He noted that the stock building comes when Commerzbank has yet to validate its August share buyback plan involving a first tranche of 600 million euros, or roughly 3.3% of its market capitalization as of Thursday, with the European Central Bank — meaning the scheme is not yet fully priced into the German bank's "very low" valuation.

Analysts from Berenberg added that a potential acquisition of Commerzbank would "materially" reduce the odds of UniCredit pursuing domestic consolidation in Italy — where the lender backed out of talks with the world's oldest bank, Monte dei Paschi, in 2021.

Additionally, "UniCredit would have to navigate through potential political and trade union objections about the deal, which could limit the value extraction from this acquisition. Lastly, as the combined entity would be a bigger and more complex bank, it could be faced with increased capital requirements," Berenberg said.

Already, Commerzbank is seeking to fend off a potential acquisition, Reuters has reported, while Frank Werneke, the head of one of Germany's largest trade unions Verdi, called on the German government to retain its share in Commerzbank "until further notice in order to avert a takeover," according to a Google-translated statement.

— CNBC's Ganesh Rao contributed to this report.