By Jenny Strasburg and Dana Cimilluca 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 25, 2019).

Merger talks between Deutsche Bank AG and Commerzbank AG have gotten bogged down over questions ranging from a lack of investor support to opposition from powerful labor unions, according to people familiar with the matter.

The banks as of Wednesday evening had no plans to disclose by Friday -- the day Deutsche Bank is scheduled to report earnings -- intentions to merge, as some had once expected. The two sides remained far from agreement on a deal, the people said.

It is still possible the two banks could ultimately manage to strike a deal, one of the people said.

Friday has become a widely expected deadline for a status update after Deutsche Bank's chairman said publicly in late March that the bank would brief investors on deal talks by the time it reports earnings. The bank has continued to communicate that plan to investors this month, stoking expectations that it could signal progress in the discussions -- or that it could abandon them.

Formal merger talks between the two lenders are in their sixth week. The negotiations were strongly encouraged by German government officials seeking to forge a bigger, stronger domestic bank to compete against U.S. and other foreign lenders. Deutsche Bank has suffered a series of blows -- from costly legal investigations to market-share losses in once-dominant trading businesses -- that have fueled concerns about its stand-alone strategy. Commerzbank's growth in Germany's crowded banking market also has come into question.

But the task of joining two big banks, both still working on multiyear turnarounds, has proved daunting and cast doubt on the payoff relative to the risks, people close to the process say.

Investors have questioned whether combining two troubled banks solves their profitability and growth problems. The prospects for a big capital hike to pay for the deal have spooked shareholders, too. And German labor unions have fought the estimated 30,000 or more job cuts expected from a merger.

The banks have been exchanging details about their businesses and workforces, comparing projections for profit and other financial metrics and cross-examining each others' assumptions, according to people familiar with the talks. The complexities of Deutsche Bank's investment bank and assets on each bank's books that might need to be written down have been topics of discussion.

Deutsche Bank executives have discussed creating a new unit to house unwanted assets and businesses that could be earmarked for closure, part of contingency planning should a merger not happen, The Wall Street Journal reported Tuesday.

Write to Jenny Strasburg at jenny.strasburg@wsj.com and Dana Cimilluca at dana.cimilluca@wsj.com

(END) Dow Jones Newswires

April 25, 2019 02:47 ET (06:47 GMT)

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