Deutsche Bank & Commerzbank merger possibility resurfaces: Report
The logo of Deutsche Bank is seen in Brussels, Belgium
The possibility of a merger between Deutsche Bank and Commerzbank has resurfaced, after an attempt was called off five years ago.
This is based on a Reuters report.
The renewed speculation is driven by Germany's quest to bolster its budget by considering the sale of stakes in the multitude of companies it owns.
Finance Minister Christian Lindner, while not indicating an immediate sale of the government's 15 per cent stake in Commerzbank, remains open to the idea, with a preference for the government eventually divesting its holding.
Sources suggest that a potential merger could offer Deutsche Bank the opportunity to diversify away from the unpredictability of investment banking earnings, contributing to the bank's long-term stability.
Although there are no active discussions at present, internal talks within Deutsche Bank have intensified, with considerations for acquisitions, including those of Commerzbank and ABN Amro.
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Deutsche Bank's Chairman, Alexander Wynaendts, expressed the bank's readiness for mergers and acquisitions in November, acknowledging the low probability of a substantial transaction in the near term due to various hurdles.
Analyst Anke Reingen from RBC Europe noted that the bank's low valuation and potential job cuts might complicate a merger, as it currently trades at a fraction of its book value.
As of Friday, Deutsche Bank shares closed down 1.23 per cent at 12.05 euros, valuing the bank at 25 billion euros ($27.37 billion), while Commerzbank shares remained relatively stable at 11.35 euros, with a valuation of 14 billion euros.
The complexities of a potential merger include Deutsche Bank's low valuation, potential asset markdowns, and the necessity for substantial job cuts to realise the synergies of combining overlapping businesses.
Documents from the German finance ministry reveal plans to raise up to 4 billion euros this year through the sale of company stakes, with the funds directed towards the state-owned rail company, Deutsche Bahn.
The government's stake in Commerzbank, dating back to the 2008 financial crisis, has remained a loss-making venture, adding weight to the considerations for a sale.
The situation is further complicated by Commerzbank's historical ties with UniCredit, which has been exploring potential mergers.
Previous talks between Commerzbank and UniCredit reportedly took place before the geopolitical events surrounding Russia's invasion of Ukraine in 2022.
(With inputs from Reuters)