Tuesday 21 May 2019

Merger talks between Deutsche Bank and Commerzbank collapse

Deutsche Bank and Commerzbank headquarters in Frankfurt
Deutsche Bank and Commerzbank headquarters in Frankfurt

Andreas Framke, Arno Schuetze, Tom Sims

German hopes of creating a national banking champion able to challenge global competitors were dashed yesterday when Deutsche Bank and Commerzbank ended merger talks due to the risks of doing a deal, restructuring costs and capital demands.

Germany's two largest banks announced that nearly six weeks of high-level negotiations about a tie-up had ended in failure, confirming an earlier Reuters report and immediately raising questions about the future of the Frankfurt-based rivals.

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The decision to ditch the talks followed a final early morning meeting between Deutsche Bank CEO Christian Sewing and his Commerzbank counterpart Martin Zielke, two sources told Reuters.

Both CEOs said a deal would not have created sufficient benefits to offset the risks and costs of a merger, which had been opposed by unions fearing 30,000 job losses, and raised concerns among investors and regulators.

While the talks are over, investors doubt either bank can go it alone for long under their current strategies given their low levels of profitability.

Government officials, led by Finance Minister Olaf Scholz, had pushed for a tie-up to create a national banking champion and end questions over the future of both banks. Shares in Commerzbank were 2.1pc lower by early afternoon. Deutsche Bank traded 0.3pc lower, erasing earlier gains.

Deutsche Bank will now face pressure to make more radical changes, such as cuts to its US investment bank as advocated by regulators and some major investors.

It is already looking at a deal for asset management unit DWS. "Deutsche Bank will continue to review all alternatives," Germany's largest bank said.

UniCredit and ING have expressed interest in buying Commerzbank.

Reuters

Irish Independent

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