DEUTSCHE BANK HEALTH VEXES BERLIN
Govt backing merger with Commerzbank despite risk of huge financial shortfall, says German official
BERLIN is so worried about the health of Deutsche Bank that it pushed for a merger with rival Commerzbank even though it could open up a huge financial shortfall, said a German official.
Deutsche Bank’s management board has agreed to hold talks with Commerzbank about the feasibility of a merger.
The state owns a 15 per cent stake of Commerzbank and is expected to be a shareholder in the new group.
The official said any tie-up would likely result in a multibillion-euro hole because a switch in bank ownership would legally trigger a revaluation of assets such as government bonds.
They would be revalued at market price, which is typically lower than the one registered on the accounts.
A second source said they expected a shortfall after the potential merger.
Rating agency Moody’s said a takeover could result in a “downward valuation adjustment for parts of Commerzbank’s asset base.”
A second official said Deutsche Bank’s future was in question because high costs left it with little profit.
A third official said one was urgently needed to reduce the number of branches in an overcrowded market.
Both said a buoyant jobs market in Germany made it easier to make staff cuts without prompting large protests because those employees would easily be able to find other work.
Deutsche Bank has said it is stable and announced last month a return to profit for last year. Chief executive Christian Sewing said it was “on the right track” for growth and lower costs.
The banks would make a decision about whether to pursue a merger within weeks, said a fifth source.
While having the government of Europe’s largest economy as a shareholder would give the group some weight, it would also be humbling for Deutsche Bank, once a symbol of German strength on Wall Street and London.
Officials also see the potential merger as a way to protect Commerzbank from being snapped up by a foreign rival, which could make Deutsche Bank’s problems worse.