Matchmaker Berlin nudging Deutsche Bank and Commerzbank to merge

Germany’s two largest banks are feeling pressure to solve their problems by throwing their lots together. But is it the best move? Regulators remain undecided.
Quelle: dpa
Commerzbank and Deutsche Bank: Better together?

(Source: dpa)

Once again, rumors are flying that Berlin is pushing for a merger of Germany’s two remaining big private banks, battered as they are, to create a flagship bank for Europe’s largest economy. Government representatives reportedly have been putting out feelers to regulators to create sympathy for such a move.

The chief overseer of the two banks is the European Central Bank, but they're also supervised by two domestic regulators, the Bundesbank and BaFin. There have been no formal discussions of a merger, but some regulators have the impression that there's movement in the new year.

“There have been exploratory discussions between the government and the financial supervisors,” an insider told Handelsblatt. The Bundesbank, BaFin and both banks declined to comment.

Finance Minister Olaf Scholz on Tuesday repeated remarks he has made before that Germany needs a financial sector that is competitive globally. “That is central for Germany and for Europe,” he said at the Future Forum Europe in Berlin.

The government is not pushing a shotgun marriage but rather wants to create a favorable environment for the two banks to find their way to each other, insiders say. 

A recent parliamentary inquiry revealed that representatives of the finance ministry — often state secretary Jörg Kukies — met with representatives of Deutsche Bank 23 times last year.

When asked what it would think of a merger, the finance ministry's answer was brusque: “We are open to any economically reasonable option.” The federal government still holds a 15.6-percent share in Commerzbank after bailing it out in 2009.

Frankfurt insiders surely noticed that the member of parliament who filed the inquiry was Danyal Bayaz, a financial expert for the Green Party. Bayaz was once an intern in the Goldman Sachs department then led by Kukies, though it’s unclear whether they met at that time.

Until now Commerzbank was more eager to talk about a merger, but Deutsche Bank has come to accept that it cannot wait much longer to find a strategic solution to its problems. A wave of bad news, including an extensive raid on its headquarters in November in a money laundering and tax evasion investigation, has driven down the stock price and unsettled customers.

December was a bad month for Deutsche as customers held back business, refinancing costs went up and staff was thoroughly demotivated. But in the current quarter, the bank won some mandates in the US, and CEO Christian Sewing bragged at a New Year’s staff party that costs are finally under control.

A merger of the two banks isn’t the only option. Researchers at Deutsche examined last fall several possible merger scenarios with Commerzbank or UBS, and it turned out merging with the Swiss bank would be more positive for shareholders. But Berlin would not look kindly on moving the headquarters of such a big German bank abroad.

A merger with Commerzbank, however, wouldn’t make Deutsche’s investment banking operation profitable and might force corporate customers to subsidize a loss-making operation. But a merger of the two could lead to billions in savings, albeit at the cost of massive numbers of jobs.

Regulators have had mixed feelings. Top ECB supervisors have often spoken in favor of a consolidation of the sector. BaFin President Felix Hufeld, however, warned in an interview last fall that consolidation was not a cure-all.

Martin Greive covers politics for Handelsblatt in Berlin. Andreas Kröner and Yasmin Osman cover banking in Frankfurt. Darrell Delamaide adapted this article into English for Handelsblatt Today. To contact the authors: [email protected], [email protected], and [email protected].