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Deutsche Bank can explore the possibility of merging with Commerzbank

09.06.2018
Finance, Germany

Deutsche Bank is exploring the possibility of merging with Commerzbank. Negotiations are held against the backdrop of the ongoing crisis of Deutsche Bank and the fall in the value of its shares.
This is reported by Bloomberg with reference to informed sources.

According to the agency, the chairman of the supervisory board, DB Paul Ahleitner, already conducts negotiations on the merger with the shareholders of the bank. The issue is also being studied by the German government, which is the largest shareholder of Commerzbank and owns about 17% of the shares of the financial institution. However, direct negotiations between the leadership of the two banks have not yet been held. According to one source, the top management of Deutsche Bank and Commerzbank earlier, in the summer of 2016, was already considering the prospects for business combination, but at that time it was decided to abandon such a step. Both banks then decided to concentrate on internal restructuring.

A key obstacle to the conclusion of such a deal could be the difficult situation in which Deutsche Bank found itself. Because of the continuing decline in the value of its shares, dissatisfaction with the prospects of merger is expressed by shareholders, who fear an additional reduction in their share. In addition, the bank itself is at a disadvantage to merge. According to financial manager of Deutsche Bank James von Moltke, the bank was in a "vicious circle" of falling revenues and a decrease in the credit rating. Since the beginning of the year, its capitalization has fallen by 39%, down to a level of € 19.9 billion. The crisis was also faced by Commerzbank, whose capitalization in the same period fell by 24%, to the level of € 11.9 billion. After the merger, banks may Reduce its operating costs by reducing the number of offices. However, this, according to Bloomberg, may also become an obstacle to the merger, as a reduction in the number of jobs will cause dissatisfaction with the unions.

Since July 2015, John Kreien became CEO of Deutsche Bank, the bank's shares have lost more than half of the value and one of the largest investment banks in the world has forcedly announced the closure of hundreds of branches and the reduction of tens of thousands of jobs. At the end of May, it became known that the Federal Deposit Insurance Corporation (FDIC) had contributed the American division of Deutsche Bank (Deutsche Bank Trust Company Americas, DBTCA) to the "problematic" list. This threatens the bank with a transfer to external management, if its management fails to solve financial problems.