Executives at the German bank Commerzbank believe that a multi-billion dollar merger with their Italian rival UniCredit could hamper lending to small and medium-sized businesses in the Mittelstand, people familiar with internal discussions told the Financial Times.

Executives at the German bank have warned that the transaction, which would be one of the largest cross-border banking deals in Europe since the financial crisis, could pose a threat to the companies that form the backbone of Europe’s largest economy.

Earlier this month, UniCredit revealed that it had acquired a 9 per cent stake in Commerzbank, after buying half of it from the government in an after-hours block deal, turning the Italian group into Commerzbank’s second-largest shareholder after the government.

The Milan-based bank said on Monday it had increased its stake in the German lender to around 21 per cent and submitted a request to boost the holding to up to 29.9 per cent.

The German government currently owns 12 per cent of Commerzbank and said it is not planning to sell any further Commerzbank shares “until further notice”.

Commerzbank’s shares have risen by 24 per cent since UniCredit disclosed its stake on September 11, with UniCredit’s shares also rising 5 per cent over the same period.

Executives at the financial institutions added that a merger would see Commerzbank’s lending decisions and management capabilities moved abroad, potentially disrupting domestic clients who have been using the bank’s services for decades.

UniCredit told the FT that these arguments misrepresented the Milan group’s inner workings, adding that it was a “pan-European” bank with “full self-standing legal entities” in all markets.

In addition, the German bank fears that a larger shareholding by UniCredit could lead to a significant loss of customers, who might leave the bank after the merger.

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