Commerzbank and Deutsche Bank confirm merger talks; shares jump
Shares in Deutsche Bank and its smaller rival Commerzbank rallied on Monday, after the two banks confirmed long-held speculation they were in merger talks.
Commerzbank AG
€15.52
17:30 27/12/24
Deutsche Bank AG
€16.53
17:30 27/12/24
DJ EURO STOXX 50
4,857.86
23:59 24/12/24
Xetra DAX
19,984.32
17:00 27/12/24
Reports have been mounting for months that a tie-up was on the table, and on Sunday both sides finally confirmed talks were underway.
Deutsche Bank said: “In light of arising opportunities, the management board of Deutsche Bank has decided to review strategic options. In doing so, the management board of Deutsche Bank is focused on improving the growth profile and profitability of the bank.”
It added there was “no certainty that any transaction will occur” but confirmed: “In this context, we are engaging in discussions with Commerzbank.”
Commerzbank also confirmed that the two banks had agreed to “start discussions with an open outcome on a potential merger”.
If successful, the tie-up would create Europe’s second-largest bank after HSBC.
As at 1000 GMT, shares in Commerzbank were ahead 6%, while Deutsche Bank was up 3%. However, not all analysts immediately backed a possible merger.
RBC Capital Markets argued: “In our view, a merger has a high level of executive risk, and earnings per share accretion is dependent on a number of factors.”
Its analysts conceded it was too early to know what any deal would look like. However, they noted: “In our base case, the combined group return on tangible equity goes up by 2 percentage points to 7.5% in 2021 and 7% in case of an additional 1% capital buffer – a lot of risk to reach a ROTE still well below the cost of equity. The deal would also do little to change the investment cases.
“We already give Commerzbank and Deutsche Bank credit for cost control, but are concerned about the revenue outlook.”
According to local media, both banks have come under political pressure to consider a deal. Commerzbank, which is 15.5% owned by the German government, is seen as vulnerable to a foreign takeover from rivals such as France’s BNP Paribas.
Deutsche Bank, meanwhile, is a leading player in the global banking market. But it has endured a tough period including boardroom tussles, being fined for failing to prevent money laundering and persistent declines in revenues.