Deutsche Bank and Commerzbank call off merger talks

AFTER SIX weeks of rumour, a progress report was due. Deutsche Bank, Germany’s biggest bank, had promised investors an update on merger discussions with its Frankfurt neighbour, Commerzbank, on April 26th, alongside its first-quarter earnings. The update came, unplanned, a day early. On April 25th the two banks said they had called off the talks, the announcement prompted by a Reuters report that negotiations were about to fail.

The pair said that a deal would not justify the “additional execution risks, restructuring costs and capital requirements associated with such a large-scale integration”. Outside the two banks and the German government, Commerzbank’s biggest shareholder with a 15% stake, plenty had reached that conclusion even before the banks said in mid-March that talks were under way and embarked on weeks of negotiation. Two troubled lenders looked unlikely to make one strong one. Deutsche eked out only a tiny profit in 2018, its first for four years, while Commerzbank has made paltry returns. Deutsche’s shares have been trading at about 25% of book value, Commerzbank’s at little more.

Though Commerzbank has done a lot of reconstructive work since taking over Dresdner Bank during the global financial crisis, Deutsche still resembles a building site. It is still attempting to integrate Postbank, a retail...



via The Economist: Finance and economics Business Feeds

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