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Germany forces a marriage that may not work



  Picture taken March 17, 2019 shows the headquarters of German banks Deutsche Bank (L) and Commerzbank in Frankfurt am Main, West Germany.

FRANK RUMPENHORST | DPA | Getty Images

The picture taken March 17, 2019 shows the headquarters of German banks Deutsche Bank (L) and Commerzbank in Frankfurt am Main, West Germany.

In 2007, Deutsche Bank had its own balance of EUR 2 trillion ($ 2.25 trillion) and a market capitalization of nearly EUR 50 billion compared to Commerzbank's relatively humble total assets of EUR 270 billion and a market value of EUR 17 billion. Over the past ten years, the gap has been reduced.

Deutsche Bank has lost 600 billion euros of its assets and down more than 60 percent in terms of market value. Commerzbank, on the other hand, has achieved around £ 100 billion or so in its total assets, but lost half of its market capital.

A merger would give Deutsche Bank and Commerzbank access to nearly 1.9 trillion euros of total capital, and the German government seems to want to go on the accelerator to get this done.

But some context is likely to be seen as an embarrassment to such ones as John Cryan, former CEO of Deutsche Bank, Christian Sewing, the bank's current chief, and Peter Altmaier, the German finance minister. The three have reaffirmed their belief in Deutsche Bank's strategy and position as one of Europe's strongest banks.

Sewing took over as CEO in April last year, and in September he said that the bank may consider merger negotiations once it has increased profitability over the next 18 months. Little knew he would be pushed for merger negotiations even before the end of this 18-month period.

While the merger gives Deutsche Bank access to a much larger balance, it can also mean a billion euro financial hole because it would force the revaluation of lender assets and a risk that 30,000 jobs will be cut.

The merger, if it should happen, will be embedded with certain warnings. The German government still owns about 15 percent of Commerzbank, and a merger would mean a greater expression from the government in the bank's assault. It can also mean that banks can be pressured to be more risky than ten years ago.


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