FILE PHOTO: The banners of Deutsche Bank and Commerzbank are represented in front of the German stock index, the DAX Board, at the Frankfurt Stock Exchange, Germany, on September 30, 2016. More Bank / Kai Pfaffenbach / File Photo
This announcement came after the meetings of the management boards of both banks, said a person familiar with the matter.
"In view of the opportunities that arise, the Deutsche Bank Board of Directors has decided to review the strategic options," Deutsche said in a statement. He stated that there was no certainty of an agreement and that the board was "focused on improving the growth profile and profitability of the bank".
Commerzbank said the result was "open".
The official disclosure of the talks increases the chances of concluding an agreement that had long been the subject of speculation and which appeared in 2016 before the two banks decided to focus on the restructuring.
The German government has lobbied for a combination of health care from Deutsche, which has been striving to generate sustainable profits since the 2008 financial crisis.
The government, which holds a stake of more than 15% in Commerzbank as a result of a bailout, wants a national champion of banks to support its export-oriented economy, better known for its cars and its machine tools.
Berlin also wants Commerzbank's specialty – the financing of medium-sized companies, the mainstay of the economy – to be in the hands of the German.
"We will seriously evaluate a merger," said the person with knowledge of the case, before the announcement.
"But there is no guarantee that there will be an agreement in the end," added the person.
An announcement made on Sunday represents a step forward, after a person familiar with the case told More Bank this month that the Deutsche board had agreed to meet with the Commerzbank on the feasibility of a merger.
Although the banks did not publicly comment on the merger talks before Sunday, German Finance Minister Olaf Scholz confirmed Monday that there were negotiations.
On Thursday, the supervisory boards of both banks are expected to hold long-planned meetings, More Bank told More Bank four people aware of the case. The state of the merger negotiations should be discussed.
The amalgamated bank would have approximately € 1.8 trillion in assets, such as loans and investments, and a market value of around € 25 billion ($ 28.3 billion), based on the closing prices of the shares on Friday.
It occupies one fifth of the German retail banking market and employs 140,000 people worldwide.
The German union Verdi has strongly opposed a possible merger between the two banks, saying that the group resulting from the merger would be a more attractive target for a hostile foreign takeover and claiming that at least 10,000 jobs are threatened.
Some major shareholders have privately declared their opposition to a merger, but the US investor Cerberus, a major investor in both banks, has favored the talks, told More Bank a person familiar with the matter.
Deutsche, the largest bank in Germany, the largest economy in Europe, escaped the financial crash unscathed but lost ground.
In 2016, the International Monetary Fund described the bank as "the biggest potential risk in the world among the competitors of the financial system" because of its links with other banks.
The German authorities fear, for example, that a recession or a big fine will compromise the fragile recovery of the bank.
In addition to Deutsche Deutsche Bank, Commerzbank is the last remaining large German public bank after a series of mergers.
Like Deutsche, Commerzbank struggled to rebound and German authorities say they are vulnerable to a foreign takeover. If an international rival took it, it would increase Deutsche's competition on its territory.
Report by Tom Sims and Andreas Framke; Edited by Ed Taylor and Ludwig Burger and Keith Weir