Italy's UniCredit said on Wednesday it has increased its potential stake in Commerzbank to 28% using further derivatives, as markets watch whether it will take the plunge with a buyout of the lender. German.

Italy's second largest bank said that 9.5% of its share in Commerzbank is through a direct share and around 18.5% is obtained through derivative instruments.

UniCredit has applied to the European Central Bank for permission to acquire a stake of up to 29.9% in the German bank and at the same time has an offer for the Italian peer Banco BPM.

CNBC has reached out to Commerzbank for comment.

This breaking news story is being updated.