Deutsche, Commerzbank to step up merger talks

19 March, 2019 12:00 AM printer

BERLIN: Germany's top lenders, Deutsche Bank and Commerzbank, plan to launch formal exploratory talks toward a possible merger, national media reported Sunday, following months of preliminary negotiations.

The German government has been encouraging the two Frankfurt firms to explore a cross-town merger and create a "national champion" in financial services to better compete on the global stage, reports AFP.

A week ago Finance Minister Olaf Scholz confirmed that "there are talks about the situation as it is" between the lenders, with the government a "fair companion" to the discussions.

On Sunday the Die Welt newspaper reported that both banks were expected to publish so-called ad hoc notices as early as Sunday announcing the next phase of talks.

"The boards of both banks have been exploring for a long time, in a small circle, whether the two banks would make a good fit," Die Welt reported.

"Driven by the politicians in Berlin, the talks are thus heading into the next round."

National news agency DPA also reported that the banks were expected to step up their negotiations, citing unnamed industry sources.

Critics of a potential deal have pointed to both Deutsche and Commerzbank's weakened state in the wake of the financial crisis, saying combining two ailing firms would not produce a healthy one.

Commerzbank is still part-owned by the German state, after Berlin had to step in following its 2009 acquisition of troubled Dresdner Bank, and is partway through a tough restructuring.

Deutsche is also reorganising, and only returned to the black last year after many years spent fighting the financial and legal fallout of its breakneck pre-crisis expansion.

One reason for the two lenders' long fight back to profitability is the tough environment in Germany, where intense competition including from public savings banks squeezes margins on retail banking.