UniCredit has since last year been building up a holding in its German rival, seeking a merger to create a pan-European banking giant despite fierce opposition from Berlin.

In a statement, UniCredit said that it had increased its direct stake in Commerzbank to 26% by converting derivatives into shares.

That is up from a previous level of 20% in July.

The lender said it intended to convert a further tranche of derivatives to Commerzbank stock in due course, which would take its direct stake to 29%.

Under German law, shareholders must make a bid for the entire company if their stake exceeds 30%.

UniCredit’s initial holdings in Commerzbank were in large part indirect, and converting them into physical shares increases the pressure on Commerzbank.

Commerzbank has strongly resisted UniCredit’s advances and insists it will remain independent.

Following news of UniCredit’s increased direct stake, the German lender said that it “does not change the fundamental situation and our stance”.

It has sought to cut costs to make itself more attractive to shareholders, with 3,900 jobs to be axed by 2028.

Germany’s government has also repeatedly said that it supports the country’s second-largest lender staying independent.

Chancellor Friedrich Merz told bank employees in a May letter that UniCredit’s moves were “hostile” and “unacceptable”.

Berlin still holds a 12.1% stake in Commerzbank, the legacy of a 2008 bailout in the midst of the global financial crisis.