Germany willing to merge Deutsche Bank, Commerzbank

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The German finance ministry is willing to “orchestrate” a merger between Deutsche Bank AG and Commerzbank AG, according to Focus magazine.

Sunday 09, December 2018

(Bloomberg)--Various scenarios have been discussed, including one in which the German state would become Deutsche Bank’s largest shareholder for about five years before merging the two banks, Focus reported without saying how it got the information. Alternatively, Deutsche Bank could raise money from German industrial companies to buy Commerzbank. Another option discussed in the finance ministry has been creating a holding company that would own stakes in both banks, according to the report.

Representatives for the finance ministry, Deutsche Bank and Commerzbank all declined to comment.

German Finance Minister Olaf Scholz has repeatedly said that the country needs strong banks for its export-oriented economy. A merger between Deutsche Bank and Commerzbank to achieve that goal has won the backing of Berlin, people with knowledge of the matter have said. The German government owns a stake of about 15 per cent in Commerzbank, making it the lender’s largest shareholder.

The purchase of a stake in both Deutsche and Commerzbank by private equity firm Cerberus Capital LLP last year sparked speculation about a merger between the two banks that was previously discussed in 2016, people familiar have said. The recent slump in Deutsche Bank’s share price and its protracted failure to revive growth has fuelled talk that it may need to weigh a combination to address its problems.

The German investment in Commerzbank was made during the financial crisis, when the lender needed a state bail-out. The 10-year anniversary of the onset of that crisis has recently sparked debates in Germany about the costs to taxpayers and using public money to prop up a private bank would face the risk of a strong public backlash.

A potential investment by German industrial businesses was explored in 2016 but wasn’t pursued.

Deutsche Bank’s top management is wary of any deal, not least because its low share price means that it would be merging from a position of weakness. Chief Executive Officer Christian Sewing has repeatedly ruled out actively pursuing a deal before he can show he can hit his financial targets for next year.

Germany’s largest lender has also been discussing converting itself into a holding company. Such a legal structure would make it easier to merge only parts of its operations—such as the retail bank—or add those operations to a joint venture with another bank. Chief Financial Officer James von Moltke has dismissed those discussions as non-strategic.

TAGS : Deutsche Bank, Commerzbank, Olaf Scholz, Cerberus Capital LLP

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