Merger talks between Deutsche Bank and Commerzbank should fail: source

Business

Merger talks between the two major German lenders, Deutsche Bank and Commerzbank, are expected to fail, a person informed of the deal said Thursday.

April 25, 2019 3:11 pm
(Update: April 25, 2019 4:00 pm)

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FRANKFURT: The merger talks between Deutsche Bank and Commerzbank are expected to fail, although no final decision has been made, a person informed of the case said Thursday.

The two largest German banks have both declined to comment on the merger talks, which have been fiercely opposed by the unions, with unions fearing a loss of 30,000 jobs.

Representatives of the German government, led by Finance Minister Olaf Scholz, called for a rapprochement to create a national champion of banks and put an end to questions about the future of the two banks, which were struggling to meet their expectations. since the financial crisis.

Commerzbank shares were down 1.5% at 0728 GMT Thursday, while those of Deutsche Bank were up 0.7%.

Deutsche Bank should provide an update on the state of negotiations, which is now in their sixth week, Friday at the latest, said another official.

The inability to reach an agreement will put pressure on Deutsche Bank to make more radical changes, such as cuts to the US investment bank that regulators and some big investors have advocated. Deutsche is already looking for an agreement for its asset management unit.

Failure to negotiate may also make Commerzbank vulnerable to foreign takeover. Both Unicredit and ING Groep have expressed interest in the second largest German lender, sources said.

Some major Deutsche Bank investors have questioned the logic of the operation and are unwilling to provide more money to do so, while the rating agencies warn of the risks.

The European Central Bank would ask Deutsche Bank to raise new funds before authorizing a merger, said a person who knows the case directly.

The ECB's single supervisory board, scheduled to meet on Thursday, has not received an official request from banks regarding a merger, said a person familiar with the situation.

But the supervisors' discussions would probably focus on the disadvantages rather than the benefits, said the person, adding that it seemed increasingly unlikely that an agreement would be reached.

The two banks announced the start of formal negotiations on March 17 and have since reconciled the figures.

Last month, Deutsche Bank President Paul Achleitner said the banks would aim to announce more concrete measures before the results are released on April 26.

Deutsche's first quarter results are expected to post persistent weakness, with an expected decline of 75% in net profit and 9% in revenue, according to a consensus forecast published on the bank's website.

(Report by Francesco Canepa, Frank Siebelt, Hans Seidenstuecker, Andreas Framke, Arno Schuetze and Tom Sims, edited by Sabine Wollrab, Tassilo Hummel, Michelle Martin and Alexander Smith)