Commerzbank's ownership stake in UniCredit increases, with the Italian bank seeking to acquire up to 29.9% of the German lender.

• Commerzbank shares have been acquired by UniCredit through financial instruments, and a request has been made to increase the holding to a maximum of 29.9%.
• The German government's announcement over the weekend that it wouldn't sell any more shares in Commerzbank caused its shares to plummet in early trade Monday.
• Nearly 20 years in Germany, UniCredit emphasized the significance of a "strong banking union" for Europe's economic prosperity.

On Monday, UniCredit declared that it had raised its ownership in German lender to approximately 21% and submitted a proposal to increase the stake to a maximum of 29.9%.

The Italian bank acquired the additional Commerzbank shares through financial instruments, it said in a Monday statement. Earlier this month, UniCredit announced it had taken a 9% stake in Commerzbank, confirming that half of this shareholding was acquired from the German government.

According to UniCredit, there is significant potential value that can be realized within Commerzbank, either as a standalone entity or as part of UniCredit, for the benefit of Germany and its stakeholders. However, for this potential to be realized, action must be taken.

To give UniCredit "full flexibility and optionality," Commerzbank has hedged the majority of its exposure.

The bank's future actions will depend on engagement with its management and supervisory boards, as well as its stakeholders in Germany.

Since the 2008 financial crisis, Commerzbank has had Berlin as a major shareholder, with the city injecting 18.2 billion euros ($20.2 billion) to save the lender.

Last Friday, German government officials met to discuss the state's stake in Commerzbank. They determined that the bank is a "stable and profitable institution" with a "strategy focused on independence." As a result, the federal government will continue to support the bank by maintaining its shareholding, according to a Google-translated statement.

The German government has made it clear that unfriendly attacks and hostile takeovers are not good for banks, as stated by Chancellor Olaf Scholz on Monday, according to Reuters. Commerzbank did not provide any additional comment on the matter.

At approximately 4:10 p.m. London time, Commerzbank shares dropped by 6.5%, while UniCredit shares fell by 3%.

Commerzbank may be a target for a takeover by the state, as UniCredit CEO Andrea Orcel stated that an unsolicited tender offer to buy out other investors would be an aggressive move.

The German government's "trust" in the Italian bank was the reason why it was able to buy 4.5% of the state's stake in Commerzbank, according to Orcel.

Nearly 20 years in Germany, UniCredit emphasized the significance of a "strong banking union" in Europe for the bloc's economic prosperity on Monday.

The banking sector in Europe is more fragmented than in the U.S., but analysts hope that a move from UniCredit will encourage more cross-border consolidation.