FRANKFURT (Reuters) – Deutsche Bank 's board of directors has agreed to talk to rival Commerzbank about the feasibility of a merger, an informed person told Reuters on Saturday. case.
PHOTO FILE: Christian Sewing, CEO of Deutsche Bank AG, addresses the media at the bank's annual press conference in Frankfurt, Germany on February 1, 2019. REUTERS / Kai Pfaffenbach – / File Photo
The first unofficial contacts took place within a very small group and the mandate of the Deutsche Administration Board was entrusted more than a week ago, said the source, S & D. Speaking under the guise of anonymity.
The talks are at a very early stage and could collapse, added the person confirming the information previously reported by the newspaper Welt am Sonntag.
A spokesman for Deutsche Bank and a spokesman for Commerzbank both declined to comment.
Speculation about a possible merger between the two largest German listed lenders has been legion for months and has increased under the mandate of the Minister of Finance, Olaf Scholz, who stressed the importance of the strength of banks.
Proponents of a merger say that a merger would give a combined entity – which would have a market value of more than 24 billion euros ($ 27 billion) on the basis of the closing prices of Friday – a 20% share of the German retail banking market.
This would allow him to charge higher prices in a country where banking services are free or low cost.
Welt am Sonntag said the two banks were responding to pressure from the government, which is expecting a decision on the merger in the coming weeks.
A spokesman for the Ministry of Finance declined to comment on the report.
The two lenders, who had already flirted with a merger in 2016 before focusing on restructuring, have struggled to regain sustainable profitability since the global financial crisis.
The government holds a stake of more than 15% in Commerzbank following a bailout and Deutsche Bank shares have fallen 73% over the last five years.
Founded in 1870 to assist international trading companies, Deutsche is currently considered one of the largest banks in the global financial system. She quickly developed in the 90s to become a giant investment bank.
However, its market share has declined since the financial crisis and three years of losses, rating downgrades, unsuccessful stress tests and money laundering scandals have weighed on the market.
Its chief executive, Christian Sewing, has publicly stated in recent months that he's focused on restoring profitability before embarking on a complicated merger project.
Sewing should report to the board before the bank takes further action, said the source.
Commerzbank chief Martin Zielke was more open to the idea of a rapprochement, a person with a good knowledge of his thinking said. Last month he said that speculation about a merger was "understandable".
A person familiar with the matter said in February that the US investor Cerberus Capital Management, the majority shareholder of Deutsche Bank and Commerzbank, was open to a merger, thus increasing the likelihood of reconciliation.
However, some other key shareholders of the Deutsche Bank are opposed, stressing the need for patience to allow the bank to regain its footing.
The rating agencies, which reduced Deutsche Bank's credit ratings to its lowest level, warned that a merger would be risky and difficult to achieve.
The unions also expressed their opposition fearing significant job losses.
German authorities have been worried for Deutsche since 2016, when the bank was negotiating a heavy fine with the US Department of Justice for its role in the mortgage crisis.
At the time, Deutsche and the government had publicly downplayed speculation that it might need state support. Behind the scenes, however, tensions were high.
Over the past year, Deutsche has undergone a dramatic change of direction that has led Sewing to management. The bank has reduced its international activities to focus more on retail banking and its domestic market.
Negative securities on the lender, however, continued.
In November, the police raided the offices of all members of the Deutsche Bank's board of directors in connection with an investigation into money laundering allegations related to the Panama Papers.
Deutsche said in January that it received requests for information from regulators and law enforcement agencies investigating a money-laundering scheme involving Danske Bank.
In the United States, the Congress is also investigating allegations of money laundering and the bank's relationship with the US president, which owes him at least $ 130 million.
Deutsche Bank has more than 20 million private and professional customers and Commerzbank approximately 18 million.
Report by Tom Sims and Andreas Framke; Additional report by Paul Carrel in Berlin; Edited by John Stonestreet and Kirsten Donovan