Germany steps up work on potential DeutscheCommerzbank tie-up

Finance ministry asks for regulator’s analysis of a merger between major lenders

Germany’s finance ministry has asked banking regulator Bafin to share the results of its scenario analyses that model a potential merger of Deutsche Bank and Commerzbank, people briefed on the matter told the Financial Times.

The move underlines how German officials are worried about the continued financial woes and sliding share prices of the country’s two biggest private sector lenders. Those concerns have led to a stepping up their assessment of options for consolidation in the sector.

Olaf Scholz, German finance minister and vice-chancellor, has repeatedly called for a revival of the country’s industrial policy aimed at strengthening the financial sector and creating a national banking champion.

A person briefed on the government’s thinking told the Financial Times that the finance ministry was “definitely looking” at the option of a merger between the banks, as German industry needed a lender big enough to help it expand globally.

Between May and December, senior policymakers had 23 talks with Deutsche Bank’s chairman, its chief executive and other senior managers. They discussed the lenders’ “strategic options” among other issues, according to a reply by the finance ministry to an inquiry filed by a Green party member of the Bundestag.

“The federal government is open for economically sensible options,” wrote deputy minister Bettina Hagedorn, adding that the actual decisions would have to be taken by the banks.

With close to €2tn in total assets, a merged Deutsche-commerzbank would be the third-largest European bank after HSBC and BNP Paribas.

Over the past year, Deutsche Bank’s share price has fallen by close to 50 per cent, turning the country’s largest lender into one of the worst performing German blue-chip companies.

After criminal prosecutors raided the bank’s Frankfurt headquarters in late November as part of an investigation into suspected money laundering, the bank’s share price fell to a new all-time low.

Germany’s business daily Handelsblatt on Wednesday reported that the government was arguing in favour of a merger behind the scenes. Four people familiar with the discussions between policymakers and the banks told the FT that while the finance ministry was evaluating the merits of a potential deal, it was not actively pushing for it.

“There is no direct pressure from Berlin,” said one of the people. Another said: “No government can make such decisions, only the institutions themselves.”

The finance ministry, Bafin, Bundesbank, the European Central Bank, Deutsche Bank and Commerzbank declined to comment.

One person briefed on the matter said “the finance ministry clearly has an industry policy agenda with regard to German banks, but this agenda has not been greeted with a lot of enthusiasm by the lenders”. Both banks are busy with internal restructuring efforts, and many believe they currently lack the bandwidth to pull off a merger.