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Shares in Germany’s top two lenders Deutsche Bank and Commerzbank surged Monday as the country’s finance minister appeared to confirm reports they were bowing to pressure from Berlin to open merger talks.
Around 4:45 pm in Frankfurt (1545 GMT), Deutsche’s stock had gained 4.9 percent to trade at 8.05 euros ($9.04), while Commerzbank added 7.7 percent at 7.14 euros.
‘There are talks about the situation as it is. The federal government is a fair companion to private business discussions but I have nothing more to say about it just now,’ Finance Minister Olaf Scholz said earlier at a meeting with European counterparts in Brussels.
Citing sources close to the matter, both weekly Welt am Sonntag and the Financial Times have reported that the two Frankfurt firms are finally heeding calls to explore a cross-town merger, although the talks are not yet advanced enough to trigger an official market notification.
Merging the two biggest private banks in the country into a new ‘national champion’ would fit with Berlin’s new-found fervour to build up such titans to compete on the global stage.
Economy Minister Peter Altmaier has joined France’s Bruno Le Maire in calling on the EU to relax merger rules and allow the creation of world-spanning businesses, after Brussels rejected a tie-up between Siemens’ rail division and French train-maker Alstom.
Critics of a potential deal have pointed to both Deutsche and Commerzbank’s weakened state in the wake of the financial crisis, saying combining two ailing firms would not produce a healthy one.
Commerzbank is still part-owned by the German state, after Berlin had to step in following its 2009 acquisition of troubled Dresdner Bank, and is partway through a tough restructuring.
Deutsche, too, is reorganising, and returned to the black only last year after years spent fighting the financial and legal fallout of its breakneck pre-crisis expansion with costs running into the billions.
One reason for the two lenders’ long fight back to profitability is the tough environment in Germany, where intense competition including from public savings banks squeezes margins on retail banking.
European banking supervisors have long urged mergers between lenders to create a more resilient financial sector – but prefer cross-border marriages to avoid bundling together national problems.