After more than a month of negotiations, Deutsche Bank and Commerzbank ended their talks as the sides have decided that a merger after the two concluded that that financial reorganisation costs and additional capital requirements were too excessive to proceed at this time.
“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,” Christian Sewing, the chief executive officer of Deutsche Bank, said in a statement. The bank has concluded that the integration risks, implementation costs, and capital requirements do not justify a complex deal.
In mid-March, it was announced that two major German banks – Deutsche Bank and Commerzbank – were discussing a possible merger to create a larger German banking champion.
With German banks still not out of the woods, more than a decade after the economic crisis began, there is still concern about their viability. Deutsche Bank, the largest financial institution in Germany had positive results in 2018 with €342 million profit.
The general feeling is that the merger was not overly beneficial for Deutsche Bank as Commerzbank doesn’t have the same amount of street credibility with clients, a fact that could impact future trades, according to a source familiar with the matter.
Shares of Deutsche Bank and Commerzbank are both down more than 35% over a 12-month period and more than 80% over a 10-year period. Discussions over a merger met also resistance from trade unions and staff as up to 30,000 jobs would be cut.