EU Approves Bank Merger

The European Union announced Tuesday it had approved the planned merger of Italian bank Unicredito Italiano SpA and German lender HVB Group AG.

The euro15.4 billion (US$18.7 billion) merger with Unicredito will be Europe's biggest banking deal and had already passed scrutiny by financial regulators in Italy and Germany.

"The clearance of this merger therefore paves the way for the creation of a truly European bank," EU Antitrust Commissioner Neelie Kroes said Tuesday. She added it would "contribute to establishing a single European market for retail and corporate banking."

Unicredito's takeover of HVB will give the Italian bank unprecedented access to customers in eastern Europe. HVB has built up a presence in countries including Poland, which has seen strong growth while western Europe's has slowed.

Kroes said she had specifically examined the market in Poland and eastern European nations like the Czech Republic and Slovakia, where both have a significant operation.

"I am confident that consumers in those countries will not suffer due to any decreased level of competition," she said.

UniCredito is Italy's largest bank and HVB is Germany's second-largest bank. Combined, they will have assets of euro733 billion, with more than 7,000 branches in 19 countries.

After HVB's acceptance of a euro15.4 billion (US$18.7 billion) takeover bid from Unicredito, the banks are hoping to raise their combined operating income from euro7.6 billion (US$9.29 billion) in 2004 to euro11.8 billion (US$14.43 billion) in 2007.

The two banks expect a combined operating profit of euro8.3 billion (US$10.15 billion) this year.

The deal would create a dominant player in the former communist east.

HVB had already said it planned to cut 2,400 jobs to cut costs and Unicredito said it would cut about 9,000 jobs as part of its planned takeover, a move that would help boost operating income at the two banks by more than 50 percent over three years.

A statement from Kroes's office said the proposed merger "would not lead to competition concerns and that in all affected national markets the combined firm will continue to face a number of strong competitors."

The merger would give Unicredito a major foothold in Germany, the continent's largest economy, and neighboring Austria - wealthy areas adjoining its prosperous north.

The deal marked the second time in as many years that a major cross-border acquisition has taken place. Last year, Spain's Santander Central Hispano SA bought Abbey National PLC, Britain's sixth-biggest bank, in a 9.5 billion pound deal.

(Source: AP/Forbes)

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