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Germany to keep Commerzbank stake as lending institution go for self-reliance

Germany will not offer any more shares in Commerzbank for now and the bank's. technique is geared towards independence, the country's Finance. Agency said on Friday, in the clearest sign yet that the. federal government doesn't presently favour a takeover of the country's. No. 2 lending institution.

The declaration comes days after Italian bank UniCredit. announced it had dived in to buy a 9% stake in. Commerzbank to become its second largest shareholder, and its. President Andrea Orcel signified his merger ambitions.

But UniCredit's relocation - a deal codenamed 'Flash' after. Orcel's pet - took Berlin by surprise and triggered opposition. from labour unions and a defence method from Commerzbank.

The German federal government, which still owns 12% of Commerzbank. after selling 4.5% of its shares to UniCredit, would play a secret. role in whether any offer can happen.

However, over the past week labour unions and Commerzbank. management have actually contacted the federal government to hold back on any. additional share sales.

The Financing Agency, which becomes part of the German financing. ministry and handles government holdings, said a committee. conference of government authorities on Friday had chosen it will. not, till more notice, sell any extra shares.

UniCredit decreased to comment. A Commerzbank spokesperson. stated the bank had a strategy that works.

Commerzbank is a steady and rewarding institute. The. bank's strategy is geared towards self-reliance. The Federal. government will accompany this until more notice by. maintaining its shareholding, the firm said.

An official from Germany's financing ministry, who did not. desire to be recognized, on Friday described the recent sale of. part of Commerzbank's stake as a test to see whether there were. strategic buyers in the market. But others in the government. have stated they had wanted the shares that all went to UniCredit. to go to a broad base of financiers.

STRONGER RIVAL

UniCredit CEO Orcel has said he wishes to begin talks on a. merger he says would develop a much more powerful competitor in. Germany. His gambit comes after years of calls for Europe to. improve its banks' competitiveness in the face of larger U.S. and Asian rivals.

He deals with huge obstacles.

Cross-border European banking offers have actually been stymied by. elements including years of paltry profitability that have actually left. loan providers too weak to pursue tie-ups. And regulative barriers to. moving resources easily across borders have been enhanced by. political leaders' choice for home-grown 'champs'.

A turnaround of UniCredit has conquered among the. obstacles. The bank, unlike competitors, has the monetary firepower. for a strong combination after enjoying bumper profits.

However national politics will be the hard part, and some. investors have warned that cross-border offers stay. challenging.

Anke Reingen, a banking expert at RBC, stated UniCredit was. now unlikely to make a takeover offer soon.

We do not believe a deal is off the table, permanently, but any. move is most likely to be behind we had initially anticipated, she. said.

Friday's statement indicates the German federal government's plan is. to now hold its Commerzbank shares beyond the 90-day lockup. concurred at the time of the share sale last week, according to a. individual familiar with the discussions.

(source: Reuters)