Germany’s government will keep its 12% stake in Commerzbank until further notice, after a sale of a portion of its shares to Italy’s UniCredit sparked takeover speculation.

FRANKFURT (Reuters) - Shares of Commerzbank traded 3.1% lower on Monday after the government said that it would retain its 12% stake in the German bank for now in a move that will likely keep any merger with Italy's UniCredit on hold.

Commerzbank's management has warned the German government that a potential multibillion euro merger with Italy's second-largest bank UniCredit is a threat to businesses that make up the backbone of Europe's biggest economy, the Financial Times reported on Monday.

Germany will not sell any more shares in Commerzbank for now and the bank's strategy is "geared towards independence," the country's Finance Agency said on Friday, in the clearest sign yet that the government doesn't currently favour a takeover of the nation's No.

UniCredit SpA has demonstrated at its existing German unit that it can cut costs in the country, which bodes well for its potential plans for Commerzbank AG, analysts at KBW wrote in a note.