Six weeks of talks to create a merger between Deutsche Bank and its German rival Commerzbank have collapsed.
Media reports out of Europe last night said the talks failed because Deutsche Bank had concluded there was no reason for the merger to happen – despite continuing pressure from the German government for a deal between the two struggling lenders.
The Financial Times said both banks had concluded that the integration risks, implementation costs and capital requirements do not justify a complex deal like a merger between the two.
Deutsche Bank said the benefits from such a merger would not stack up against the probable costs. The deal was also facing increasing opposition from german unions and investors, especially in Deutsche Bank.
Now analysts are waiting to see if the Italian bank, UniCredit SpA, (which has a big German banking operation) will follow through with previously leaked hints that it would look at bidding for Commerzbank should the Deutsche Bank talks fail.
Analysts say other likely bidders could include the eurozone’s other largest banks, such a BNP Paribas, Banco Santander SA and ING Groep. But not UK giant, Barclays which last night revealed a poor March quarter result and more cost cuts.
Deutsche Bank is due to report its first quarter performance later today and had previously said it would releasing an update on the merger talks – but there has been no statement and increasing market chat that the talks were going badly between the two.
Ahead of the results release, Deutsche Bank revealed the bones of the March quarter’s performance with a higher than expected profit based on market forecasts, but a sharp slide on the result in the March quarter of 2018.
Deutsche Bank said it will report a first-quarter net profit of about 200 million euros ($US223 million) on Friday night. First quarter pre-tax earnings will be about 290 million euros, topping forecasts around 260 million, but well under the 432 million euro profit posted in the first three months of 2018.
Revenues are expected to be 6.4 billion euros, including 3.3 billion in the Corporate & Investment Bank, with costs down to 5.9 billion euros and a Common Equity Tier 1 ratio of 13.7%at the end of the quarter, the bank said in its statement.
Deutsche Bank’s chairman said in late March that the bank would brief investors on deal talks by the time it reports its quarterly earnings.
German Finance Minister Olaf Scholz (who pressed for the merger) said on Thursday that German industry needed competitive banks for its global business after merger talks between Deutsche Bank and Commerzbank ended in failure.
Scholz said the two banks had discussed closer co-operation, but added: “Such co-operation only makes sense if it pays off in business terms and moves towards a resilient business model.”
