Deutsche Bank, Commerzbank confirm talks on possible merger

BERLIN • Germany’s two biggest lenders, the ailing Deutsche Bank AG and Commerzbank AG, confirmed yesterday they would launch formal talks toward a possible merger following months of preliminary negotiations.

Deutsche Bank said in a statement it was “reviewing strategic options and confirms discussions with Commerzbank”, adding that “there is no certainty that any transaction will occur”. Commerzbank said both banks had “agreed yesterday to start discussions with an open outcome on a potential merger”.

The German government has been encouraging the two Frankfurt firms to explore a cross-town merger and create a “national champion” in financial services to better compete on the global stage.

A week ago, Finance Minister Olaf Scholz confirmed that “there are talks about the situation as it is” between the lenders, with the government a “fair companion” to the discussions.

“The boards of both banks have been exploring for a long time, in a small circle, whether the two banks would make a good fit,” Die Welt newspaper reported. “Driven by the politicians in Berlin, the talks are thus heading into the next round.”

National news agency DPA also reported that the banks were expected to step up their negotiations, citing unnamed industry sources.

Critics of a potential deal have pointed to both Deutsche Bank and Commerzbank’s weakened state in the wake of the financial crisis,
saying combining two ailing firms would not produce a healthy one.

Commerzbank is still part-owned by the German state, after Berlin had to step in following its 2009 acquisition of troubled Dresdner Bank AG, and is partway through a tough restructuring.

Deutsche is also reorganising, and only returned to the black last year after many years spent fighting the financial and legal fallout of its breakneck pre-crisis expansion.

One reason for the two lenders’ long fight back to profitability is the tough environment in Germany, where intense competition including from public savings banks squeezes margins on retail banking.

European banking supervisors have long urged mergers between lenders to create a more resilient financial sector — but prefer cross- border marriages to avoid bundling together national problems.

Two German unions last Wednesday firmly rejected the idea of a merger between the top lenders.

“The merger would not create a ‘national champion’” as hoped for in the finance and economy ministries, said service workers’ union Verdi.

Instead, the combined banks “would become much more attractive for a ‘hostile’ takeover, for example from France”, the workers’ organisation added.

On the jobs front, “at least 10,000 further jobs would be in grave danger” on top of thousands already slated to go as both lenders press through far-reaching restructuring projects, Verdi estimated. — AFP