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Home / Business / Deutsche Bank and Commerzbank, Germany's two largest lenders, in merger talks

Deutsche Bank and Commerzbank, Germany's two largest lenders, in merger talks



On Sunday, Deutsche Bank and Commerzbank, Germany's two largest lenders, said they had begun merger discussions, in which analysts see as a final deep effort to create a national champion who can compete with the giant US investment banks. [19659002] Deutsche Bank said in a statement that the board would investigate "strategic options" intended to increase its growth and profitability, and Commerzbank confirmed the merger negotiations. Both lenders warn that the talks cannot lead to an agreement.

The idea of ​​merging the two companies has been supported in recent months by each bank, and by the German government, after previous discussions of years have broken. [1

9659002] The total bank would have $ 2 trillion in assets and be the third largest lender in Europe, behind HSBC Holdings in the UK and BNP Paribas in France. Together, Deutsche Bank and Commerzbank will have about one-fifth of private customers in Germany, in theory giving them enough critical mass to be profitable in the country's crowded retail banking market.

For Berlin, the two would create a new national master lender who could support the country's major export industry and compete for international business with the giant Wall Street banks. For the lenders, it offers the opportunity to get economic scale, cut costs and combine technology.

But analysts have questioned that the melting of two besieged banks would only give an even bigger problem. Commerzbank and Deutsche Bank are among the least profitable banks of their size, mainly because they are too large and unwieldy in terms of the revenue they generate.

Deutsche Bank reported a net loss of 409 million euros, or about $ 464 million, for the fourth quarter of 2018. Commerzbank outperformed and reported a profit of € 113 million on revenue of € 2.1 billion . However, investors remain skeptical. Shares in both banks have traded near a 10-year decline among reports that the banks may consider a merger.

In a message to employees on Sunday, Christian Sewing, Deutsche's CEO, said that I have consistently emphasized that consolidation in the German and European banking sector is an important issue for us. "He added:" Our goal is still to be a global bank with strong capital market activities – based on the leading position in the domestic market in Germany and Europe, and with a global network. Rumors have circulated for several months that German political leaders attempted to orchestrate a merger to create a home-made alternative to Wall Street giants such as Goldman Sachs and JPMorgan Chase. If there is another financial crisis, Berlin officials will not German companies must rely on foreign banks for credit and access to capital markets.

The agreement still faces many obstacles: Communities representing Deutsche Bank and Commerzbank have expressed opposition to a merger, which would surely lead to thousands of job cuts. agreeing on the terms of a merger can be difficult as the leaders of the two long-term rivals attempt to defend their peat.

Both banks are based in Frankfurt, and the headquarters are within easy walking distance of each other. with just one bank with a significant international footprint, and may be the last chapter in the long decline once powerful German banking system.

Of the five largest German banks in the late 1990s, Commerzbank and Deutsche Bank are the only two that still exist as independent entities. Both banks were founded in 1870, when Germany emerged as an industrial power.

Former bank mergers in Germany have not proved good.

Commerzbank demanded state aid in 2009 after bought Dresdner Bank, which turned out to have billions of pounds in toxic assets. The German government still owns about 15 percent of Commerzbank.

Deutsche Bank is still struggling to absorb Postbank, as it bought in 2010.

But Deutsche Bank's biggest problem is that it lacks a clear identity or competitive advantage in the global banking market, analysts say. And it's still about the legal consequences of its attempt to become a major player on Wall Street.

Deutsche Bank was caught in many of the major scandals of the early 2000s: rich interest rates, the sale of toxic mortgages, money laundering and violent sanctions. It paid billions of dollars in fines.

Deutsche Bank's reputation continues to suffer. In November, German prosecutors and police officers called Deutsche Bank's headquarters in Frankfurt as part of a survey of whether any bank employees helped criminals wash money in offshore tax havens. The bank has said that its own inquiry did not reveal any offenses by employees.

In the US, Deutsche Bank has been admitted to investigations by President Trump. The bank was one of the few lenders willing to do business with Mr. Trump in recent years.

Last week, the New York law firm sent issues to Deutsche Bank and Investors Bank for records related to the financing of four major Trump Organization projects and a failed effort to buy Buffalo Bills in the National Football League in 2014, according to a person who is informed of the application.

Deutsche Bank is already subject to two congressional investigations.

The main reason for the merger is that it would give the overall unit a large enough share of the German banking market to be profitable.

The German banking market is notoriously difficult for commercial banks because consumer and small business loans are dominated by quasi-government savings banks. It makes it difficult for lenders like Deutsche Bank and Commerzbank to make money, even though they are based in one of the world's most formidable economies.

The merger of Commerzbank and Deutsche Bank may be the final megadeal on the summary of Paul Achleitner, a former Goldman Sachs executive now chairman of Deutsche Bank's board. Mr. Achleitner has been a back-stage force in the transition of German banking for decades.


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