Monday, March 18, 2019 5:15:16 AM
Published March 17, 2019FinancialsReuters
FRANKFURT (Reuters) - Deutsche Bank and Commerzbank Opens a New Window. confirmed on Sunday they were in talks about a merger, prompting labor union Opens a New Window. concerns about possible job losses and questions from analysts about the merits of a combination.
Germany's Opens a New Window. two largest banks issued short statements following separate meetings of their management boards, a person with knowledge of the matter said, indicating a quickening of pace in the merger process, although both also warned that a deal was far from certain.
Christian Sewing, Deutsche Bank's chief executive, told employees that Deutsche still aimed "to remain a global bank with a strong capital markets business... with a global network".
Sewing said many factors could still prevent a merger and a Deutsche spokesman said the talks were expected to last some time. Commerzbank described the outcome as open.
However, formal disclosure of talks appeared to boost the chances of concluding a deal first floated in 2016 before the banks opted to focus on restructuring.
The German government has pushed for a combination given concerns about the health of Deutsche, which has struggled to generate sustainable profits since the 2008 financial crisis.
The government, which holds a stake of more than 15 percent in Commerzbank following a bailout, wants a national banking champion to support its export-led economy, best known for cars and machine tools.
Berlin also wants to keep Commerzbank's speciality - the funding of medium-sized companies, the backbone of the economy - in German hands.
"SHAKY ZOMBIE BANK"
A merged bank would likely be the third largest in Europe after HSBC and BNP Paribas, with roughly 1.8 trillion euros ($2.04 trillion) in assets, such as loans and investments, and a market value of about 25 billion euros.
However, sceptics questioned the wisdom of a merger.
"We do not see a national champion here, but a shaky zombie bank that could lead to another billion-euro grave for the German state. Why should we take this risk?" said Gerhard Schick, finance activist and ex-member of the German parliament.
While the banks had not publicly commented on merger talks until Sunday, Finance Minister Olaf Scholz last Monday confirmed that there were negotiations.
On Sunday, the ministry acknowledged the announcement and said it remained in regular contact with all parties.
However, there were signs of political opposition.
Hans Michelbach, a lawmaker from the Christian Social Union (CSU), the Bavarian sister party of Chancellor Angela Merkel’s Christian Democratic Union (CDU), urged the government to sell its 15 percent stake in Commerzbank before a deal.
"There may not be an ownership by the federal government in a merged big bank indirectly through an old stake. We do not need a German State Bank AG," he told Reuters.
The supervisory boards of both banks are scheduled to hold long-planned meetings on Thursday, four people with knowledge of the matter told Reuters. The status of merger negotiations is expected to be discussed.
A merged bank would have one fifth of the German retail banking market. Together the two banks currently employ 140,000 people worldwide - 91,700 in Deutsche and 49,000 in Commerzbank.
Germany's Verdi labor union on Sunday renewed its objections to a merger, saying that tens of thousands of jobs were at risk and that a tie-up added no value.
Jan Duscheck, head of the union's banking division and a member of Deutsche's supervisory board, said the union would raise its concerns on both banks' oversight bodies.
RISKS
Deutsche emerged unscathed from the financial crash but later lost its footing. German officials fear a recession or big fine could derail the bank's fragile recovery.
Other than Deutsche, Commerzbank is Germany's only remaining big publicly-traded bank, after a series of mergers.
Commerzbank has also struggled to rebound, and German officials say it is vulnerable to a foreign takeover. If an international rival snapped it up, that would increase competition for Deutsche on its home turf.
Initial reaction among analysts to a deal was skeptical.
There will only be limited benefits of adding Commerzbank's clientele of retail and small and medium businesses to Deutsche, said David Hendler, an independent analyst at New York-based Viola Risk Advisors, which specializes in risk management.
"It doesn't change the fact that Germany is not getting a flagship bank that can compete on the world stage. It's still a stunted bank with a lot of problems," Hendler said.
One of the biggest risks is how to fill what one German official has told Reuters will be a multi-billion-euro financial hole because a merger could trigger an adjustment to the valuation of some bank investments.
Commerzbank, for example, has about 30.8 billion euros of debt securities such as Italian bonds that now have a value of 27.7 billion euros. A tie-up could crystallize this loss. Deutsche has such securities at market value in its accounts.
Recent DB News
- Southwest Shares Tumble 9.6% Post $231 Million 1Q Loss, AstraZeneca Surges on 19% Annual Increase, and More on Earnings • IH Market News • 04/25/2024 11:52:46 AM
- GameStop Shares Tumble 20% in Pre-Market Trading Amid Revenue Decline, Direct Digital Plummets 42%, and More News • IH Market News • 03/27/2024 10:54:47 AM
- Fisker’s Shares Take a Hit Amid Speculation of Bankruptcy, Altria Divests from AB InBev to Fund Stock Repurchase Initiative • IH Market News • 03/14/2024 11:39:32 AM
- Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16] • Edgar (US Regulatory) • 03/08/2024 05:37:08 PM
- Form 424B2 - Prospectus [Rule 424(b)(2)] • Edgar (US Regulatory) • 03/06/2024 03:43:07 PM
- Form 424B2 - Prospectus [Rule 424(b)(2)] • Edgar (US Regulatory) • 03/06/2024 02:50:27 PM
- Form 424B2 - Prospectus [Rule 424(b)(2)] • Edgar (US Regulatory) • 02/29/2024 07:50:04 PM
- Form 424B2 - Prospectus [Rule 424(b)(2)] • Edgar (US Regulatory) • 02/27/2024 08:58:29 PM
- Form 424B2 - Prospectus [Rule 424(b)(2)] • Edgar (US Regulatory) • 02/26/2024 09:38:25 PM
- Form 424B2 - Prospectus [Rule 424(b)(2)] • Edgar (US Regulatory) • 02/26/2024 09:31:00 PM
- Form 424B2 - Prospectus [Rule 424(b)(2)] • Edgar (US Regulatory) • 02/26/2024 09:26:58 PM
- Form 424B2 - Prospectus [Rule 424(b)(2)] • Edgar (US Regulatory) • 02/26/2024 08:54:03 PM
- Form 424B2 - Prospectus [Rule 424(b)(2)] • Edgar (US Regulatory) • 02/26/2024 08:43:03 PM
- Deutsche Bank Appointed as Depositary Bank for the Sponsored American Depositary Receipt Program of Lotus Technology Inc. • Business Wire • 02/23/2024 10:38:00 PM
- Form 424B2 - Prospectus [Rule 424(b)(2)] • Edgar (US Regulatory) • 02/23/2024 08:01:44 PM
- Form 424B2 - Prospectus [Rule 424(b)(2)] • Edgar (US Regulatory) • 02/23/2024 05:31:39 PM
- Form 424B2 - Prospectus [Rule 424(b)(2)] • Edgar (US Regulatory) • 02/23/2024 05:30:20 PM
- Form 424B2 - Prospectus [Rule 424(b)(2)] • Edgar (US Regulatory) • 02/23/2024 05:29:26 PM
- Form 424B2 - Prospectus [Rule 424(b)(2)] • Edgar (US Regulatory) • 02/23/2024 05:28:57 PM
- Form 424B2 - Prospectus [Rule 424(b)(2)] • Edgar (US Regulatory) • 02/23/2024 05:26:56 PM
- Form 424B2 - Prospectus [Rule 424(b)(2)] • Edgar (US Regulatory) • 02/20/2024 09:02:18 PM
- Form 424B2 - Prospectus [Rule 424(b)(2)] • Edgar (US Regulatory) • 02/20/2024 06:46:36 PM
- Form 424B2 - Prospectus [Rule 424(b)(2)] • Edgar (US Regulatory) • 02/09/2024 08:28:38 PM
- Form 424B2 - Prospectus [Rule 424(b)(2)] • Edgar (US Regulatory) • 02/09/2024 08:20:13 PM
- Form 424B2 - Prospectus [Rule 424(b)(2)] • Edgar (US Regulatory) • 02/09/2024 08:09:55 PM
FEATURED Cannabix's Breath Logix Alcohol Device Delivers Positive Impact to Private Monitoring Agency in Montana, USA • Apr 25, 2024 8:52 AM
Bantec Reports an Over 50 Percent Increase in Sales and Profits in Q1 2024 from Q1 2023 • BANT • Apr 25, 2024 10:00 AM
Kona Gold Beverages, Inc. Announces Name Change to NuVibe, Inc. and Initiation of Ticker Symbol Application Process • KGKG • Apr 25, 2024 8:30 AM
Axis Technologies Group and Carbonis Forge Ahead with New Digital Carbon Credit Technology • AXTG • Apr 24, 2024 3:00 AM
North Bay Resources Announces Successful Equipment Test at Bishop Gold Mill, Inyo County, California • NBRI • Apr 23, 2024 9:41 AM
Epazz, Inc.: CryObo, Inc. solar Bitcoin operations will issue tokens • EPAZ • Apr 23, 2024 9:20 AM