Bank merger rumors roil markets

Details are blurry at the moment. Source: Reuters

Speculation about a merger of Germany’s two biggest listed banks has again galvanized investors and pushed up their stock prices.

Newsweekly Der Spiegel provided the spark this time after reporting that top executives at Deutsche Bank and Commerzbank were reconsidering a tie-up after rejecting the notion two years ago. Commerzbank closed 2.3 percent higher and Deutsche was up 0.95 percent, although both hit both higher prices during the day.

The Spiegel report quoted Commerzbank insiders as saying that CEO Martin Zielke would like to see a merger of the two banks “today rather than tomorrow,” while Deutsche Bank’s new CEO, Christian Sewing, still thinks a merger needs to wait another year and a half.

After their summer flirtation in 2016, the two banks decided they both needed to do some housecleaning before they could consider a merger. But not much house has gotten cleaned since then and neither has put forward a credible plan to overhaul operations and regain profitability.

Stronger together

Deutsche has barely been able to keep its share price above €10 ($11.60), while Commerzbank sank below that level in May and has not resurfaced. Its market cap has dwindled so low that last week Deutsche Börse announced it would be removed from the DAX blue-chip stock index after being a stalwart since the inception of the index 30 years ago. Deutsche Bank, meanwhile, is set to lose its place in the benchmark Euro Stoxx 50 index this month.

Many analysts think a deal is overdue. “Better one strong bank in Germany than two weak ones,” one dealer told Reuters as rumors swirled around the market Tuesday. Another said: “A merger of Deutsche Bank and Commerzbank would be the logical consequence of the current situation of the sector in Germany.”

Other experts, however, noted that bank mergers in Germany don’t have a great track record. Neither Commerzbank’s acquisition of the ailing Dresdner Bank in 2009 nor Deutsche’s takeover of Postbank could be described as a success, analyst Stuart Graham from Autonomous Research said at the Handelsblatt Banking Summit last week.

Finance Minister Olaf Scholz raised eyebrows at the summit when he said the government was taking a greater interest in preserving the ability of its domestic banks to service the global activities of German exporters. The government still owns 15.6 percent of Commerzbank after bailing out the bank in the 2009 financial crisis.

Darrell Delamaide is a writer and editor for Handelsblatt Global in Washington, DC. To contact the author:

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