(More Bank) – Deutsche Bank AG is seeking political cover from Chancellor Angela Merkel to advance a merger with Commerzbank AG.
The leaders want to be certain that the government will give them support for job cuts when they plan to publicize their potential projects, according to the people involved in the discussions. While the German Finance Ministry has encouraged troubled banks to regroup, Merkel has remained on the sidelines until now, said the population, asking not to be identified during private discussions.
The government owns 15% of Commerzbank and the chancellor will eventually have to give the go-ahead to the agreement for this to happen.
Supporters of an agreement believe that this combination would create a stronger German champion, able to compete with rivals, but Merkel remains skeptical that a merger would solve the banks' problems. The Chancellor wants to avoid being dragged into more bailouts. With nearly 30,000 jobs at risk, the possible combination of the two largest German listed lenders is also expected to face a negative reaction from public opinion and no one wants to be perceived as the instigator.
Despite these reservations, discussions continued to move forward. Deutsche Bank Chief Executive Officer Christian Sewing and his Commerzbank counterpart Martin Zielke are increasingly considering a combination as their best option as their restructuring efforts fail to pay off quickly, people said. The Ministry of Finance is also concerned that the deal must be concluded now, before the slowdown in the German economy makes it even more difficult.
Spokespersons for Deutsche Bank, Commerzbank, the Chancellery and the Ministry of Finance declined to comment.
The announcement of formal merger talks is potentially imminent, officials said, but leaders want to dispel doubts about their political coverage before continuing. The two banks' supervisory boards are expected to meet next week, separately, which could be an opportunity to finalize an announcement.
While banks are discussing the benefits of an agreement, the government's position is still being finalized, the people said. Although the Ministry of Finance clearly supports the agreement, the government's position will be decided during talks also including the Ministry of Chancellery and the Economy, led by the close ally of Merkel Peter Altmaier, they announced.
Finance Minister Olaf Scholz wants to create a national champion of the German banking sector and wants to strengthen Deutsche Bank before the economic slowdown begins to be felt. Trade union leaders at Deutsche Bank and Commerzbank closed the door on potential job losses, warning that the merger risks outweigh the benefits.
Union representatives are not the only ones to criticize. Representatives of two major shareholders of Deutsche Bank have expressed doubts about a combination, while financial regulators are also suspicious, according to people familiar with the discussions.
For politicians, there is also the prospect of European legislative elections in May, during which Scholz's Social Democrats will compete with Merkel's Christian Democrats. With their national coalition already under pressure, especially from the Scholz base, high-profile job losses would make life difficult for both leaders.
In recent days, Scholz himself has avoided the problem, avoiding questions asked by legislators during closed meetings, according to people informed of the discussions. In another meeting last week, one of Scholz's deputies dismissed the idea that the ministry was pushing for a rapprochement, officials said.
Although the leaders may wish for a strong commitment from Berlin, they are unlikely to obtain the Chancellor's public support and will probably have to be satisfied with the guarantees she is willing to offer privately, said some people.
– With the help of Aaron Kirchfeld and Jan-Henrik Förster.
To contact the reporters on this story: Birgit Jennen in Berlin at bjennen1@More Bank.net, Arne Delfs in Berlin at adelfs@More Bank.net, Steven Arons in Frankfurt at sarons@More Bank.net
To contact the editors in charge of this story: Ben Sills at bsills@More Bank.net, Dale Crofts at dcrofts@More Bank.net, Chris Reiter, Chad Thomas
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