Finimize - 💸 Europe's new big bank

What’s going on here?

UniCredit revealed a 9% stake in German rival Commerzbank, but the Italian bank has a more official alliance in mind.

What does this mean?

UniCredit’s stake might sit in the single digits, but it has bigger ambitions of making two become one. A successful merger would create Germany’s biggest bank – but there’s no guarantee the deal will be signed and sealed. The German government still owns more Commerzbank shares than UniCredit, and the Italian bank would need the European Central Bank’s approval to push its stake above 10%. Plus, Commerzbank is reviewing its defenses to push back against the takeover. Either way, investors have picked up on UniCredit’s fascination: they’ve sent Commerzbank shares up 17% since the news broke, adding millions to the prospective Italian buyer’s stake.

Why should I care?

For markets: It’s go time.

Investors and policymakers have a hankering for a European bank merger. See, US banks have size on their side, affording them a sense of security. But with so many smaller markets to conquer, and different rules and regulations in each one, European banks have struggled to build up bulk to rival their stateside counterparts. In fact, only BNP Paribas comes close. More recently, though, higher interest rates have padded profit for European banks – so they can better afford to make big bets on buying other banks. And the targets themselves look extra appealing now that they’re making more money, too.

The bigger picture: We’re not all in this together.

German labor unions are worried that the deal could threaten thousands of jobs at Commerzbank. UniCredit did slash payrolls after buying HypoVereinsbank in 2005, after all. Add in the fact that Volkswagen just warned about factory closures and layoffs across Germany, and the country’s economy – which shrank by 0.1% last quarter due to higher costs, lower demand, and global trade disruptions – could be headed for yet more dejection.

What’s going on here?

China approved a plan to increase its retirement age for the first time since 1978, wary of losing the workforce to golfing and gardening.

What does this mean?

China’s running out of spring chickens: the country’s death rate is increasingly outpacing its birth rate. And as time goes on, that means a smaller circle of workers will be tasked with supporting a wider net of retirees. So, to keep things chugging along, China plans to gradually raise the retirement age – up three years for men, and between three and five for women. Now, China’s retirement age is one of the world’s lowest, even though the country’s population is living longer than ever. But with workers already struggling through the biggest economic slump in decades, the proposal’s unlikely to win over the masses.

Why should I care?

For you personally: Bring in the bots.

China could always replace some of its workers with robots. Seriously: automation tech – think robotics and AI – will be crucial for making up for the workforce shortage, even if it is measly humans who control them (for now). Besides high-tech solutions, investors could check out sectors like meal delivery, nursing homes, and entertainment for seniors. They make up the so-called “silver economy”, which is expected to account for a tenth of China’s overall economy by 2035. And naturally, biotech and pharma firms should become increasingly important for the country, too.

The bigger picture: Run, in one of two directions.

International investors pulled record sums of cash out of Chinese investments last quarter. On top of the country’s aging population and slowing economy, they were scared off by China’s trade-related fallouts with some of its biggest customers. Plus, an escalating spat with Europe has led to a mass exodus of the region’s firms, as they shift supply chains away from China. Of course, some would take this opportunity to recall Warren Buffett’s famous advice: “be greedy when others are fearful”.