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Deutsche-Commerzbank merger talks collapse

April 26, 2019 00:00:00


BERLIN, Apr 25 (AFP): Germany's two biggest lenders Deutsche Bank and Commerzbank said Thursday they had called off talks on a possible merger, dashing Berlin's hopes of creating a financial "national champion".

"After thorough analysis, we have concluded that this transaction would not have created sufficient benefits" to justify the risks and costs of the complex deal, Deutsche Bank chief executive Christian Sewing and Commerzbank chief Martin Zielke said in a statement.

"After careful analysis, it became apparent that such a combination would not be in the interests of either bank's shareholders or other stakeholders."

Both investors and employee unions had strong reservations about a tie-up between the Frankfurt giants.

And the retreat from the mooted merger is a setback for Chancellor Angela Merkel's government.

Finance minister Olaf Scholz especially had hoped to chivvy reluctant executives in Frankfurt into creating a national banking giant.

The federal government, which still holds a 15-per cent stake in Commerzbank after a state rescue in 2009, was encouraging the start of talks long before the banks' official announcement in mid-March that they would sound one another out.

"Globally active German industry needs competitive banks that can accompany them across the world," Scholz reiterated in a statement Thursday.

But he acknowledged that mergers or other forms of cooperation "only make sense if the business case adds up and if they're headed towards a dependable business model."

Investors welcomed the move, with Deutsche stock adding 4.1 per cent to trade at 7.91 euros just after 11:00 am (0900 GMT), surging to the top of the gainers list on the DAX 30 blue-chip index.

Commerzbank gained 2.3 per cent to trade at 7.62 euros.

Financial sector voices had warned that the lenders were weakened after years of limping recovery from the financial crisis and its fallout, and tackling far-reaching restructuring projects of their own.

One symbolic reminder of their weakness came late last year, as Commerzbank was nudged out of the DAX by payments processing firm Wirecard.

Deutsche remains exposed to possible legal risks, including a Russian money laundering scandal, and both lenders are battling an environment of low interest rates and intense competition at home in Germany.

"The negative side effects of such a merger could be substantial, creating a bank that is too systemic to fail and too complex to manage," Isabel Schnabel of the government's Council of Economic Experts wrote in the Financial Times earlier this month.

Unicredit chief Jean-Pierre Mustier also recently considered the probability of a merger between banks at European level to be "very low".


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