Skyscrapers including the headquarters of the European Central Bank (ECB), left, Commerzbank AG, center, and twin tower headquarters of Deutsche Bank AG, right, stand illuminated at dusk in the financial district in Frankfurt, Germany, on Tuesday, Aug. 13. 2019. Germany’s economy shrank in the second quarter, ramping up pressure on Chancellor Angela Merkel to unleash fiscal stimulus as manufacturers reel from a U.S.-China trade war. Photographer: Alex Kraus/Bloomberg
LONDON: Five years after Deutsche Bank and Commerzbank aborted an attempt to merge, an uncertain outlook for bank profitability and Germany’s need to plug a hole in its budget are rekindling speculation about a potential deal.
Germany has said it is looking at all options to raise funds by selling stakes in some of the 100 or more companies it owns.
Though a sale of its remaining 15% holding in Commerzbank isn’t imminent, Finance Minister Christian Lindner is open to a disposal and ultimately would prefer the government exiting the stake, according to a source.
A merger with Commerzbank would allow Deutsche Bank to further diversify away from volatile investment banking earnings, bolstering the lender’s longer-term stability, another factor that could sway the German government, said a source.
Deutsche Bank, which has completed the bulk of a multi-year restructuring plan, has recently stepped up internal discussions on deals, including possible purchases of banks such as Commerzbank and ABN Amro, Bloomberg News reported last Friday.
Deutsche Bank in recent months has come closer to reopening the idea of a merger with Commerzbank, even if there are no live discussions, a source told Reuters.
Officials for the finance ministry and a spokesperson for Commerzbank didn’t immediately reply to requests for comment made outside business hours. Deutsche Bank declined to comment.
Deutsche Bank shares closed down 1.23% last Friday to 12.05, valuing the bank at 25bil (US$27.37bil).
Commerzbank shares ended the day little changed at 11.35, valuing it at 14bil.
A combination would be complicated by Deutsche Bank’s low valuation, assets that would need to be marked down and could lead to painful job cuts to reap the benefits of combining overlapping businesses. It trades at a fraction of its book value.
Deutsche Bank Chairman Alexander Wynaendts said in November the company wanted to be ready for M&A if the opportunity arose.
“The chances of a sizable transaction are relatively low in the near term given the many hurdles,” Anke Reingen, an analyst at RBC Europe, wrote in a note to clients last Saturday.
But press speculation and previous comments by the bank have increased the likelihood of a move, she said.
Germany’s stake in Commerzbank dates back to the global financial crisis of 2008 and is still loss-making for the government.
According to documents from the German finance ministry, seen by Reuters, the government plans to raise up to 4bil this year by selling company stakes. — Reuters
