In an interview with CNBC Thursday (Jan. 18), Deutsche Bank CEO Christian Sewing seemed to quash recent — and unconfirmed — reports that his company was in talks to merge with fellow German financial institution Commerzbank.
“I wouldn’t say it’s on top of my priority, to be honest. I have always said for years that M&A in the banking industry, particularly in Europe, must come at some time, but most important for that is that certain preconditions are met — preconditions from a regulatory point of view, finalization of the banking union,” he said.
“Obviously, with regard to the sharply increased interest rates, you have to think about fair value gaps given the mortgage books of a lot of banks, so I don’t think it is a priority for this year,” added Sewing, who was interviewed at the World Economic Forum in Davos, Switzerland.
The CNBC report noted that a merger of the two banks — Germany’s largest — could create a combined company with roughly $2 trillion in assets.
A report by Reuters earlier this week said that the two banks had resumed merger talks after calling off plans to combine five years ago. That report said that uncertainty in the bank sector and a need by the German government — which owns part of Commerzbank — to shore up its budget has reignited speculation about a merger.
A source told Reuters that merging with Commerzbank would allow Deutsche Bank to pivot further away from investment banking earnings, bolstering its longer-term stability and making it a more enticing buyer in the eyes of the German government.
As noted here late last year, the European Central Bank has slowed the pace of interest rate hikes, leading to greater competition for deposits and forcing lenders to increase what they pay to bring in new savers.
Hiking fee revenues will be “a focus point of our growth initiative” over the next several years, Bettina Orlopp, finance chief at Commerzbank, told Bloomberg News, going on to say that the bank is focusing on growing its asset and wealth management units.
“Many other European banks are following suit, using their recent earnings presentations to tell investors they’re spending on aspects of their business that don’t depend on lending revenue — such as insurance, private banking and payments — as they expect interest income to peak,” PYMNTS wrote earlier this week.