Deutsche Bank, Commerzbank Merger Talks Hit Stumbling Blocks
April 24 2019 - 8:32PM
Dow Jones News
By Jenny Strasburg and Dana Cimilluca
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 24, 2019 20:17 ET (00:17 GMT)
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