Germany: Deutsche Bank and Commerzbank call off deal talks

Commerzbank and Deutsche Bank announced Thursday, April 25, that they have ended talks about a combination.

In a statement on its website, Commerzbank wrote the two sides discontinued talks about a combination after careful analysis determined it would not be in the interest of either bank’s shareholders to combine.

“It made sense to evaluate this option for domestic consolidation in Germany. However, we were always clear: we needed to be convinced that any potential combination would generate higher and more sustainable returns for shareholders and allow us to enhance our value proposition to clients,” said Martin Zielke, CEO of Commerzbank, in the statement. “After thorough analysis, we have concluded that this transaction would not have created sufficient benefits to offset the additional execution risks, restructuring costs and capital requirements associated with such a large-scale integration.

Deutsche Bank and Commerzbank have been in deal talks since the middle of March after Deutsche Bank Chief Executive Christian Sewing confirmed it in a memo. Rumors had been swirling for months about a potential deal between the two German banks. In the memo, Sewing said that while Deutsche had been making progress during the last couple of months in its turnaround, it had also been assessing its opportunities as they come up. With a stated mission to remain a global bank with a big capital markets business, Sewing said it’s important to pursue options that make economic sense to the company. As a result, the board of Deutsche would review its options, including a deal with Commerzbank.

A combination of the two German banks via a merge has been cropping up since 2016, before either of the two banks were forced to restructure. With the health of Deutsche Bank ailing, the German government has urged the two companies to merge. The idea is to create a national bank that can support the economy, which is export-focused. Had a deal happened, it would have been the third-biggest bank in Europe with US$2.04 trillion in assets. HSBC and BNP Paribas would be the only two European banks to trump it in assets.