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UniCredit ups Commerzbank stake via derivatives to 28%

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Process ongoing to seek authorisation for stake of up to

29.9%

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UniCredit also trying to buy Italian rival BPM

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BPM's market price well above UniCredit bid's price

(Adds comments from Commerzbank in paragraph 4, details in

8-10)

MILAN, Dec 18 (Reuters) - UniCredit has raised

its stake in Germany's Commerzbank to 28% with new

derivative contracts, the Italian bank said on Wednesday, as its

bid for smaller domestic peer Banco BPM faces hurdles.

UniCredit in September emerged as the biggest private

investor in Commerzbank, in a move that angered the German

government. It sought European Central Bank clearance to get to

29.9% - just below the level that triggers a mandatory takeover

offer - before raising the stake with derivatives to near 21%.

The authorisation process is ongoing, UniCredit said, adding

it was in touch with supervisors. The process can take up to 90

working days from when the ECB receives the documents.

UniCredit now holds 9.5% of Commerzbank directly and 18.5%

through derivatives.

A spokesperson for Commerzbank said the bank would not

comment on UniCredit's announcement, other than saying it

continues to focus on implementing its strategy which it will

present to investors on Feb. 13.

Shares in Commerzbank were up 3.9% at 0841 GMT.

"UniCredit's average entry price for the entire position is

below current trading levels," the bank said, indicating it

would be able to liquidate the investment at a profit.

"UniCredit's economic exposure is almost fully hedged,

displaying prudence in approach and providing full flexibility

and optionality."

The move comes while UniCredit is under pressure in Italy to

improve its bid for Banco BPM, with its offer at a 14% discount

to the market price as of Monday.

Announcing the BPM bid, UniCredit CEO Andrea Orcel said his

bank could not afford to be side-lined in accelerating

consolidation in its home market.

He added he was pausing expansion efforts in Germany until a

new government was in place because of a rule that would force

UniCredit to pay cash - and with a floor on the price - if it

launched a full bid for Commerzbank within six months of

crossing the 5% ownership threshold.