Italy’s UniCredit has agreed to buy domestic rival Banco BPM in a €10.1 billion ($10.6 billion) all-stock deal, the bank said Monday.

The offer at once signals that UniCredit’s September buy-up of a stake in Germany’s Commerzbank is less of a short-term strategy. It also foils a possible attempt by the Italian government to see BPM, the country’s third-largest lender, grow to a size that would pose a challenge for its two larger financial institutions, Intesa Sanpaolo and UniCredit.

BPM on Nov. 6 offered to buy out asset manager Anima Holding in a €1.6 billion deal, then a week later bought a 5% stake in Monte dei Paschi di Siena from the Italian government for €1.1 billion. (Anima, for its part, bought a separate 3% stake in Monte dei Paschi di Siena.)

UniCredit’s €6.66-per-share offer represents a 0.5% premium to BPM’s closing stock price Friday. But it’s a 14.6% jump over BPM’s share price from Nov. 6, the day it bid for Anima.

“The Italian banking sector, which is one of our two biggest markets, is potentially consolidating,” UniCredit CEO Andrea Orcel said on a conference call Monday, according to the Financial Times. “We cannot remain absent from that move.”

But Orcel, on the call, also addressed UniCredit’s standing with Commerzbank. The Italian lender quietly amassed a 4.5% stake in the German bank in September, doubled it in a surprise bid, then sought to extend that to 21% through derivatives contracts. The sudden moves sparked backlash from the German government and prompted Commerzbank to dig in, naming a new CEO and issuing more ambitious goals on profit, revenue and return on tangible equity.

At the time, Orcel dismissed the buy-up as merely “an investment” but also made clear that a full takeover was a future possibility.

Orcel on Monday reiterated that Commerzbank is “an investment for now.”

“We can sit on it for a while. It will remain there. It’s not diverting management, it’s not requiring from us anything,” Orcel said Monday. “We are hoping that our presence will prompt Commerzbank to unlock a lot of the value that we know they have, faster.” 

Political tensions in Germany, however, may have made a play for Commerzbank less likely in the short term. The nation is set to hold a snap election in February.

“I think it is important to respect the electoral process in Germany,” Orcel said in a message published on UniCredit’s website.

“Given the reception we have had in certain places, we need to be patient,” Orcel said of Germany on Monday’s conference call.

UniCredit said the deal for Banco BPM could be closed by June, though it would need approval from the European Central Bank and antitrust regulators. Still, that would be faster than the bank could wrap any deal for Commerzbank if one were to arise. Orcel said he would only propose a deal for Commerzbank “at certain conditions,” according to Bloomberg. But that would have to be after Banco BPM is integrated.

“We’re never going to integrate two banks at the same time,” Orcel said, according to the Financial Times. 

By acquiring Banco BPM, UniCredit would add roughly €200 billion in assets, including a strong presence in Italy’s wealthy north, including Lombardy, home to Milan. The deal could cost UniCredit about €2 billion in integration charges in its first year, analysts estimated. But Orcel said that wouldn’t affect shareholder dividends for 2024. Further, UniCredit has pledged to keep its dividend-per-share trajectory on pace.

This is not the first time Orcel has sought to acquire Banco BPM.

Orcel prepared a buyout offer for BPM in 2022, around the time of Russia’s invasion of Ukraine. The deal fell apart, though, after a leak boosted the share price.

Orcel called Banco BPM a “historical target” that UniCredit has “on and off looked at for tens of years.”

For that matter, Orcel in 2021 sought to buy Monte dei Paschi di Siena – in which BPM just took a stake – but walked away. After Monday’s deal Orcel reiterated that UniCredit has “no ambition on MPS.” 

UniCredit said Banco BPM, meanwhile, “does not currently have the adequate scale to operate in a context of major change and evolution.” 

Any further interest from UniCredit in Commerzbank is far from certain. Germany’s new finance minister Jörg Kukies highlighted the government’s “very critical position” in Commerzbank during an interview with state broadcaster ARD on Sunday, adding, “I assume [Orcel] won’t” make a hostile offer for the bank.

Orcel affirmed UniCredit’s priorities Monday, saying Commerzbank is “not a deal” and won’t be a distraction for management. The Banco BPM offer, by contrast, “is a transaction” and will require more attention, he said.