| Germany's Commerzbank has been in the news over the past few weeks as it draws interest from Italian bank UniCredit. Bloomberg's Nicholas Comfort in Frankfurt writes about how, money aside, there's national pride at stake. Plus: Why it takes time for Fed rate cuts to work their magic and how Jellycat toys went viral. If this email was forwarded to you, click here to sign up. Germans love Italy. It's a great place to vacation. It makes really fast cars (especially the bright red or banana yellow ones). And it feels like Germany has as many trattorie as beer gardens. But when it comes to banking, it's become clear in recent weeks, many German politicians have scant interest in an Italian connection. In September, Milan-based UniCredit SpA said it had acquired 9% of Commerzbank AG, Germany's No. 2-listed lender. The Italians have since increased that to 21%, and UniCredit boss Andrea Orcel says he'd be open to a full takeover. In Berlin, that idea—and Orcel's stealthy approach—landed with a resounding thud. "Unfriendly attacks, hostile takeovers are not a good thing," Chancellor Olaf Scholz said after learning that UniCredit had upped its stake. Commerzbank is a pillar of the German economy, he said, and it's doing just fine on its own. Bettina Orlopp, Commerzbank's new chief executive officer, says the bank is on a "very, very good track." But she's held at least one video call with Orcel and his team, and on Oct. 7 the German daily Handelsblatt reported that she's accelerating a strategic assessment of operations to better prepare for a potential takeover offer.  Orlopp. Photographer: Alex Kraus/Bloomberg Although Europe has become increasingly integrated in the past few decades—main streets and malls across the region look pretty similar, and big industries such as autos and airlines have undergone a ton of consolidation—banking mostly remains restricted to national markets. One big reason: Lenders are generally barred from, for instance, using German deposits to offer loans in Italy. But a successful UniCredit bid for its German rival has the potential to nudge other CEOs to consider cross-border combinations or acquisitions. A quick look at the data indicates Commerzbank investors might benefit from a tieup. UniCredit already owns a German lender, HypoVereinsbank, which generates about twice as much revenue per employee as Commerzbank. The latter is years behind after long sticking to its old-style brick-and-mortar branches, while UniCredit's German business shrank its network to focus on providing a better experience in a smaller number of outlets. As an investor, Orcel is already giving Commerzbank tips, but doing "something greater"—his words—by combining the two would allow deeper savings while creating Germany's biggest bank by revenue. UniCredit has seen its stock surge under Orcel, and today it offers investors the fattest payouts—in terms of dividends and share buybacks—of any European lender. Investment bank Keefe, Bruyette & Woods says UniCredit "has a formula that works," and replicating it at Commerzbank could make sense. The German government might not like the prospect of an acquisition, but it acknowledges the state has a limited ability to intervene. Commerzbank's labor representatives say a takeover could cost two-thirds of employees their jobs, though they, too, have little power to block a deal. Crosstown rival Deutsche Bank AG, for now the country's largest lender, is just finding its footing after a decade of strategy reboots. Chief Financial Officer James von Moltke says there's still "work to do" before his bank might get involved in any battle for another lender. Citigroup analysts predict that UniCredit will eventually get regulatory approval to increase its stake in Commerzbank and, depending on the price, would win the backing of institutional shareholders if it were to attempt a takeover. For Hans Peter Burghof, a professor at the University of Hohenheim in Stuttgart, that's not necessarily a bad thing. Italian finance, after all, traces its roots to the Venetians and the Medici. "Italians," Burghof notes, "have been engaged in banking for longer than we have." | 
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