M and A

Major Deutsche, Commerzbank Shareholder Open To Lenders' Merging - Report

Tom Burroughes Group Editor 28 February 2019

Major Deutsche, Commerzbank Shareholder Open To Lenders' Merging - Report

A media report says a significant shareholder in both German banks is open to a merger deal between them.

US investor Cerberus, which owns large stakes in Deutsche Bank and Commerzbank, may consider a merger between Germany's two biggest banks, Reuters reported, citing an unnamed source.

WealthBriefing has contacted Deutsche Bank for comment and may update in due course.

The story, if confirmed, adds to speculation that Deutsche Bank, which has been battling to improve its capital strength and regain its edge, might take the M&A route. A few days ago, Germany's biggest bank said that it had swung back into a pre-tax profit for the first time since 2014, logging a figure of €1.3 billion ($1.49 billion) for 2018, a rise of 8 per cent on a year earlier. However, it logged a pre-tax loss of €319 million in the final three months of last year, albeit narrowing from €1.4 billion a year before.

The bank has cut its headcount, shrinking the payroll to around 91,700 at the end of last year, on track to meet the bank’s year-end target of below 93,000, on a full-time equivalent basis, it said. Cuts more than offset hiring in growth areas and control functions.

A Bloomberg story in late January said that the Frankfurt-listed bank had won a commitment for new investment from Qatar. The story cited an unnamed source.

(Editor's note: Stories like this, even if they are fully confirmed, would raise the question about whether mergers will create an even more heavily concentrated banking sector than before. Such banking groups might raise the very "too-big-to-fail" problems that arguably contributed to the unwarranted levels of risk-taking that led to the 2008 financial crash. However, another consideration is that Germany cannot afford its largest bank, and a key lender to many of its famed manufacturing firms, to languish. The plight of Deutsche is also linked to the wider fortunes of the euro-zone.)

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