Commerzbank Keeps Open Mind On M&A

Even though a potential merger with Deutsche Bank fell through, Commerzbank CEO Martin Zielke said he’s still open to the possibility of merging with another bank, according to a report by Reuters.

At an annual shareholders meeting, Zielke said the discussions with Deutsche “showed where we should possibly sharpen our strategy.”

“We will be able to say more about this in the autumn,” Zielke said at the meeting.

The talks with Deutsche Bank fell apart after six weeks, with both banks saying that there were risks to doing a deal and also restructuring costs and capital demands were big concerns.

“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,” Zielke said at the time. “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.”

A combination of the two German banks via a merger 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 urged the two companies to merge.

The idea was to create a national bank that could support the economy, which is export-focused. Had a deal happened, it would have been the third-biggest bank in Europe with $2.04 trillion in assets. HSBC and BNP Paribas would be the only two European banks to trump it in assets.

Now that it’s a no-go with Deutsche Bank, other banks have expressed interest in a merger, like Italy’s UniCredit and Dutch ING Groep. Zielke told shareholders that Commerzbank was open to growing “inorganically,” through mergers and acquisitions.

He also said he’s been meeting regularly with other bank CEOs, like ING CEO Ralph Hamers, but that there haven’t been any concrete offers just yet.

Commerzbank profits went up in 2018 but Zielke said they need to continue rising. Commerzbank is still partly owned by the state due to a bailout during the financial crisis. The bank has been cutting costs and investing more in technology.