The German government said Friday it had decided not to sell off any more of its Commerzbank shares "for the time being", after Italy's UniCredit unexpectedly built up a nine-percent stake in the German lender.
Germany "will not, until further notice, sell any additional shares", the government's finance agency said in a statement.
"Commerzbank is a stable and profitable institute. The bank's strategy is geared towards independence," it added.
"The federal government will accompany this until further notice by maintaining its shareholding."
Italy's second-biggest bank caught markets by surprise last week when it revealed it now owned nine percent of Commerzbank.
The announcement fuelled speculation of a potential tie-up between the two banks, with UniCredit CEO Andrea Orcel saying on Monday he saw "potential" in a merger.
UniCredit acquired half of its stake from the German government and the rest on the open market.
Berlin had announced shortly before that it was looking to sell down its 16.5-percent stake in Commerzbank, citing the bank's improved economic situation.
Berlin bailed out Commerzbank with billions of euros in 2009 after the global financial crisis pushed it to the brink of collapse.
Commerzbank has bounced back strongly since then, posting its best annual net profit for 15 years in 2023. It is aiming for even better results in 2024 despite expectations of lower interest rates.
UniCredit boss Orcel on Thursday ruled out a hostile takeover bid for Commerzbank, but confirmed he was seeking European Central Bank approval to raise its stake to 29.9 percent.
German opposition politicians and the Verdi labour union have in recent days voiced strong objections to a potential tie-up with UniCredit, fearing job losses.
The German government is still Commerzbank's largest shareholder, with a remaining 12-percent stake.
Commerzbank declined to comment when contacted by AFP.