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Germany: Regulator gives nod to Deutsche Bank/Commerzbank merger

 |  January 31, 2019

A potential tie-up between German banks Deutsche Bank and Commerzbank should get the nod of regulators in Germany.

The Wall Street Journal, citing a senior German regulator, reported the government is prepared to support a merger of the two to create one banking giant. The move is an acknowledgment about the health of the two banks as standalone entities, noted the report. The senior regulator told the paper that during the past few weeks he had looked over the plan and unofficially backed the idea of merging the two banks. German Finance Minister Olaf Scholz and the Social Democratic Party have been pushing for the merger. “This is a decision about industrial policy and it has to be made by politicians,” the regulator told the Wall Street Journal, adding that Chancellor Angela Merkel’s conservatives are also backing the idea of a merger. Officials from both parties declined to comment to the Wall Street Journal.

The Wall Street Journal reported that a person close to Cerberus Capital Management, the investment firm that owns a lot of shares in both banks, said the executives wouldn’t block a deal if it got the blessing of the German government. In 2018 Cerberus told investors the German market was large enough for two big banks and that it wasn’t calling for a merger of the two, noted the Wall Street Journal.

While the executives at Deutsche Bank have been resisting efforts to merge, the paper said it may not have too much control of its future any longer. It is struggling — like Commerzbank — to overhaul its business and earn enough money to make investors happy. Shares of Commerzbank ended 2018 down 54 percent while Deutsche Bank’s stock tanked 56 percent, noted the paper. Deutsche Bank Chief Executive Christian Sewing wants more time to fix the bank’s problems before seriously considering a merger. The paper noted that so far prominent investors have been on board with Sewing’s approach. Sources told the Wall Street Journal the CEO has the rest of the first quarter to stabilize the business and increase investor confidence.

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