CEO Sewing says Deutsche Bank will be sticking to its knitting until 2022

Deutsche Bank CEO Christian Sewing has told the lender’s supervisory board he is not focused on mergers at the moment and is instead concentrating on the bank’s overhaul until 2022, according to informed sources.

Sewing made the statement at an annual supervisory board meeting at which strategy was discussed.

This came amid a mounting sense of urgency in Europe on the need for banks to scale up as the coronavirus crisis deals another blow to the industry after a decade of weak returns.

Sewing has spoken before about wanting Deutsche to be an active player in European banking consolidation, but he said at the recent meeting that for now he wanted to focus on improving its profitability.

The topic of mergers was not at the top of the bank’s agenda, the sources said. They declined to be named as they were not authorised to speak to the media about private deliberations.

Deutsche Bank declined to comment.

The bank is finally making progress on a major restructuring, closing and shrinking some business lines while shedding 18,000 staff in an effort to regain profitability after years of losses. Sewing wanted to focus on that strategy until 2022, the sources said. Last year, Deutsche Bank called off merger talks with domestic rival Commerzbank. It also briefly explored a tie-up with Swiss lender UBS.

Other banks are casting around for possible deals to bulk up balance sheets and cut costs. UBS has looked at how it could absorb smaller rival Credit Suisse. In Spain, hit hard by the Covid-19 pandemic, CaixaBank is buying Bankia for € 4.3bn and Sabadell has held informal talks about a tie-up. For Deutsche, it is important that it play an active role in the merger process, rather than sitting on the sidelines and being swallowed up.

Last week, Deutsche Bank CFO James von Moltke underscored the logic behind big bank mergers. “We ’ ve been very focused on executing on our own strategy,” he said. “We think that strategy would prepare us to engage in merger activity when the time comes and the right opportunities arise.”

The pandemic has put banks under additional pressure by keeping interest rates low and forcing them to set aside billions to cover expected losses from soured loans.

The concentration of European banking business is on the way,” said Klaus Nieding of shareholder lobby group DSW.

Covid-19 will even speed up this process. Due to that, 2021 will be a very interesting year on this front.”