Merger talks between Deutsche Bank and Commerzbank intensify

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Banks intensifying informal talks as turnaround efforts sputter

Christian Sewing. File photo: REUTERS/RALPH ORLOWSKI

Less than a year after taking over, Sewing is still struggling to reverse a long slide in revenue amid a slowdown in the economy that’s delaying a return to more normal interest rates. The finance ministry favors a merger of both lenders before the situation gets worse to support the small and mid-sized companies that are the backbone of the export economy, people familiar with the matter have said.

For Deutsche Bank, the urgency to address the situation is exacerbated by high funding costs and the risk of a credit rating cut. Chairman Paul Achleitner sees an expansion of Deutsche Bank’s retail deposit base — which a Commerzbank deal would bring — as one way to lower funding costs, the people said.

Deutsche Bank last year laid some groundwork that would make such a split easier, by setting up a largely separated retail and commercial clients operations when it combined its two German retail subsidiaries. The move was aimed at placating regulators’ requirements that the new entity could be separated easily from the rest of Deutsche Bank should it be necessary to wind down the trading operations.

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