Moody's stated that if UniCredit, the Italian bank, successfully acquires Deutsche Bank, they would consider raising its credit rating by one level above Italy's sovereign rating. This depends on a series of factors, including the ability to control execution and operational risks.

UniCredit of Italy already holds nearly 21% of Deutsche Bank's shares and has expressed the desire for a full acquisition, subject to regulatory approval.

This move has angered the German government. Deutsche Bank has also stated that its global strategy is based on independence. If this acquisition is successful, it will be the first large cross-border bank transaction in Europe since the global financial crisis.

Moody's stated that they will evaluate whether UniCredit, currently rated Baa3 in line with Italy's sovereign rating, deserves an upgrade to Baa2 if an agreement is reached.

Moody's mentioned that the rating upgrade will depend on the international diversification of the merged group, exposure to Italian sovereign risk, as well as post-acquisition capitalization, asset risks, financing, and liquidity.

If an agreement is reached, UniCredit will have a greater influence in Germany with its AAA rating, diversified financing channels, lower direct exposure of Italian debt relative to capital, which will 'relax' the 'intrinsic connections and relevance' between UniCredit and the Italian rating.

Moody's stated: 'We expect that if they acquire Deutsche Bank, UniCredit's currently very strong capital will be diluted but will remain robust, at least meeting the minimum CET1 (12.5%-13%) target range announced by management.' CET1 is a key capital measure.

'While considering restructuring and other costs, any acquisition could potentially reduce profitability in the short term, but in the medium term, it will achieve higher returns through cost synergies in Germany and bring a stronger combined franchise,' Moody's added.