The bad bank would house or sell assets valued at up to 50 billion euros ($56.06 billion)- after adjusting for risk - and comprise mainly long-dated derivatives, the FT reported, citing four people briefed on the plan
FRANKFURT: Deutsche Bank AG faces stiff resistance from some supervisory board members to a merger with German competitor Commerzbank AG as the deal raises the prospect of tens of thousands of job cuts.
Jan Duscheck and Stephan Szukalski, two key labor representatives on Deutsche Bank’s highest oversight body, oppose the merger, saying a combination would fail to achieve the goal of strengthening the bank while resulting in massive staff cuts. As many as 30,000 positions could be at risk if a deal were agreed, according to people familiar with the matter.
“We reject a merger,” Duscheck -- who has served on Deutsche Bank’s supervisory board since 2016 -- said in an emailed statement. The deal would make the combined bank even more susceptible to a hostile takeover from abroad and “would not create a national champion.”
Regulators and shareholders are also questioning the rationale of a combination, showing the hurdles that Deutsche Bank Chief Executive Officer Christian Sewing and his Commerzbank counterpart Martin Zielke would need to overcome.
After struggling for years to boost profitability and stem a prolonged decline in revenue, Deutsche Bank and Commerzbank are edging closer to a merger as Germany’s largest listed lenders run out of time to show restructuring efforts are paying off. Finance Minister Olaf Scholz suggested Monday that the government is serving as a “companion” to the discussions.
Deutsche Bank shares were little changed in Frankfurt trading on Wednesday, while Commerzbank was down 0.4 percent. Both stocks have tumbled about 40 percent over the past 12 months.
Skeptical Stakeholders
The job cuts that would be required to make a deal work are a particularly high obstacle. When the banks last engaged in informal merger talks almost three years ago, their plans foresaw eliminating 20,000 to 30,000 positions, according to a person involved in the talks at the time. Cuts of a similar magnitude would likely be required this time around as well, according to people familiar with current discussions.
A merger would be “economic nonsense” that would cost thousands of jobs, Szukalski, head of German banking union DBV, said in a statement.
Labor leaders aren’t the only ones with reservations. Representatives of two large Deutsche Bank shareholders have expressed doubts about a combination with Commerzbank, preferring instead to trim the lender’s U.S. operations, according to people briefed on the matter.
Financial regulators are wary too, though they could be swayed if the banks present a viable business model and show that the new entity would be sufficiently capitalized, some of the people said. Deutsche Bank has been in touch with regulators on the deal, but at an informal level that hasn’t necessitated public disclosure, one said.
Deutsche Bank and Commerzbank declined to comment.
Job Concerns
Employee representatives are powerful forces in German companies, generally making up half the seats on supervisory boards, which hire and fire senior executives and sign off on major strategy decisions. Still, Deutsche Bank has shown in the past that it can overcome union opposition.
Two years ago, Ver.di representatives said they were “critical” of a Deutsche Bank plan to abandon the sale of retail subsidiary Postbank in part because of risks of layoffs. Just a month later, the lender made the decision anyway, and Frank Bsirske -- the union’s boss and a Deutsche Bank supervisory-board member since 2013 -- publicly welcomed the move.
Employment security is again a critical concern for Ver.di, which fears overlap between the two lenders, which largely compete for the same corporate business.
“At least 10,000 further jobs would be directly threatened,” Duscheck said. “That would be in addition to jobs that would probably have to go in the future because the merged bank, seen from today, would not achieve the growth expected of it.” - Bloomberg
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