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UniCredit poised to pounce on Commerzbank

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German bank attempts to rebuff unwanted advance

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CEO to outline plan of action

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Plans include staff cuts and new targets

By Tom Sims, John O'Donnell and Emma-Victoria Farr

FRANKFURT, Feb 12 (Reuters) - Germany's Commerzbank

is preparing staff cuts and revamped financial targets

in its efforts to fend off tie-up advances by Italy's UniCredit

, multiple people with direct knowledge of the plans

told Reuters.

Four of them said, however, the measures would be more

evolutionary than radical, while some conceded that a takeover

of the German bank, which saw its stock price jump by 50% since

UniCredit first signalled interest, may be hard to stop.

The battle for Commerzbank, pitting one of Italy's biggest

banks against the German establishment, has become a test case

of the country's ability to fend off foreign suitors and prevent

its financial centre from losing one of its few remaining big

commercial banks.

The job cuts will amount to several thousand people, two of

the people said, while a third said they would number between

3,000 and 4,000 people out of a workforce of some 42,000

employees.

They all spoke on condition of anonymity because of the

sensitivity of the ongoing deliberations.

Commerzbank's supervisory board is set to discuss the cost

cuts and new goals with management at an all-day meeting on

Wednesday, and the bank is due to present the new strategy to

the public on Thursday.

For months, Commerzbank's management, under the leadership

of CEO Bettina Orlopp, has been working on a strategy update

that she has said would reveal the "significant value potential"

of Germany's second-largest bank.

Commerzbank, which is partly state-owned and has labelled

UniCredit's moves as hostile, declined to comment.

Thursday's announcement is meant to mark a significant

moment in the effort by Germany's No. 2 bank to convince its

investors that it can thrive as an independent company.

Andrea Orcel, the CEO of UniCredit, shocked Germany's

corporate and political establishment last year when his Italian

bank - also that nation's No. 2 - snapped up a hefty stake in

Commerzbank and began pressing for a tie-up in the most

ambitious attempt yet at a pan-European bank merger.

Commerzbank's strategy update follows a better than expected

20% increase in full-year net profit, a result the bank believes

illustrates the success of its turnaround in recent years.

The bank's current strategy plan through the year 2027 was

first published in 2023. Last September, weeks after UniCredit

disclosed its interest, Commerzbank ratcheted up some of those

targets.

The job cuts, which could send hundreds of employees into

early retirement, will aim to avoid unsettling the remaining

staff while underlining the bank's willingness to sacrifice some

to avoid even worse cuts under UniCredit.

The bank will attempt to harness technology to streamline

its operations and is also expected to signal that it is on the

hunt for modest bolt-on acquisitions rather than major deals,

the people added.

That contrasts with big deals in the works in Spain, Italy

and elsewhere. The CEO of the Dutch lender ING told Reuters he

was looking for acquisition opportunities, potentially joining a

wave of takeovers sweeping Europe.

Orcel, who has long considered a tie-up with Commerzbank,

has said a combination between the two banks would be the best

possible outcome, but he has not ruled out walking away.

Commerzbank's management, employees and the nation's

chancellor, Olaf Scholz, have all spoken against a potential

takeover, but at least one big investor and some business

leaders favour talks.

Political defiance remains strong. Boris Rhein, the premier

of Commerzbank's home state of Hesse, told a gathering of

Germany's financial elite on Monday that UniCredit needed to

give up.

"Nobody wants what you are doing. Withdraw!" Rhein said.

(Editing by Tomasz Janowski)