Deutsche Bank prepares Plan B if merger talks fail
Deutsche Bank is working on an alternative strategy to present to investors if takeover talks with Commerzbank collapse, according to people familiar with the matter.
Some top shareholders want the bank to prepare options as obstacles to a combination pile up. CEO Christian Sewing is considering two basic scenarios: a small update that would mainly consist of more and accelerated cost cuts including at the investment bank, and a bigger strategy shift that would create upfront costs.
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Formal talks have dragged on for almost five weeks and there's no indication that an agreement is near. Opposition has been mounting as unions seek to prevent tens of thousands of job cuts, and political support has waned.
Even inside the banks, there's an acute awareness of the many obstacles, leaving executives undecided. At least two of Deutsche Bank's largest investors said they would want to see a new strategy should the discussions fail. A spokeswoman for Deutsche Bank declined to comment.
Deutsche Bank Supervisory Board chairman Paul Achleitner has said the bank plans to give an update by the publication of its first-quarter results, on April 26. Commerzbank had been pushing for an earlier announcement to limit uncertainty for employees.
Scepticism about the benefits of a tie-up was always high, but the discussions had the backing of the Finance Ministry. Even with all the obstacles, a deal could still happen given what's at stake for the banks and the country.
Among the key obstacles are the prospect of revenue attrition, the battle to achieve cost savings, and the question of how to raise the money needed for a transaction.
People involved estimate that clients seeking to reduce their exposure to a combined bank could pull as much as €1.5bn of their business.
A takeover would probably also trigger a revaluation of some of Commerzbank's assets and then there are restructuring expenses, estimated at around €4bn.
All of these obstacles would reduce the benefit from cost savings that could be achieved by cutting overlapping branches and jobs.
As many as 40,000 positions are on the line which has labour representatives at both banks up in arms. "We oppose the merger of Deutsche Bank and Commerzbank and that's why there's no possibility, no scenario ... no conditions under which it could be successful," said Jan Duscheck, a union official on Deutsche Bank's supervisory board.