Daily Management Review

Reports Suggest Deutsche And Commerzbank Could Merge, Shares Rise


03/11/2019




Reports Suggest Deutsche And Commerzbank Could Merge, Shares Rise
The possibility of the merger of the two largest banks of Germany - Deutsche Bank and Commerzbank, infused confidence of investors resulting in the shares of both the banks gaining at the stock exchange.
 
Deutsche had been under pressure to create a strategy for the long term as the German government has been demanding it because the bank had been unable to generate sustainable profits following the global financial crisis of 2008. The largest German even has had to cough up billions in penalties and fines
 
The merger of the two banks could be of use if it resulted in one German player surviving in the longer run, said the Berlin based BGA, which is the Federation of German wholesale, foreign trade and services, and is the body that represents the large and mid-sized export businesses.
 
Of late, German exporters have found it hard to get German banks who could provide them with export credit because of stricter rules and low interest rates.
 
"It is getting harder for companies to find a partner who can provide funding," BGA President Holger Bingmann said. "The business model of banks has come under pressure, and we would be glad if in the long run, to have at least one global player as a partner for our international business."
 
According to media reports quoting sources with knowledge of the matter, it is likely that  tentative talks for the merger would soon be held by the chief executive of Deutsche Bank with representatives from the local rival Commerzbank.
 
A report on the early stage merger talks, was first published by Germany's Welt am Sonntag newspaper. The newspaper had claimed that a decision on the merger in the coming weeks is being expected by Berlin politicians.
 
There were no comments available about the possible merger from Deutsche and Commerzbank.
 
According to reports published last month quoting unnamed sources with knowledge of the matter, the chances of the merger are quite bright because the proposal for a tie up between the two banks is reportedly supported by U.S. investor Cerberus Capital Management which is a major shareholder in both Deutsche Bank and Commerzbank. However, others are still to be convinced of the merits of a deal.
 
"We're still against such a merger," said a report quoting a person close to a major Deutsche Bank shareholder.
 
There was a rise of 1.7 per cent in the shares of Deutsche Bank while there was an increase of 4.1 per cent in the stocks of Commerzbank at 1005 GMT on Monday. Both the increases were more than the average performance of Germany's blue-chip DAX index, which saw an increase of 0.2 per cent.
 
A 20 per cent share of the German retail banking market could go to the combined entity of Deutsche Bank and Commerzbank if the merger goes through according to proponents of the merger. The new  combined entity would possess a total equity market value of more than 24 billion euros ($27 billion) on the basis of the closing share prices of the companies on Friday.
 
(Source:www.todayonline.com)






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