German Chancellor Angela Merkel said it’s up to Deutsche Bank AG and Commerzbank AG executives to decide if their historic merger plans make sense, exposing divisions in the coalition.
The plan to combine Germany’s two biggest lenders is a private business matter, Merkel said at the Global Solutions summit in Berlin, after the lenders announced talks on a deal that could transform the country’s banking landscape. The government would have “a certain interest” to look at the deal because of its near 16 percent shareholding in Commerzbank, she said.
“I very much don’t want the government to intervene,” Merkel said in an onstage discussion with John Micklethwait, editor-in-chief of Bloomberg News. “Only the companies
can and must assess this for themselves.”
The finance ministry had backed a merger as a way to assert a national banking champion for Germany and help ensure that country has a domestic lender capable of funding its export-oriented economy.
The two banks confirmed the move to deeper discussions in statements, capping months of speculation and behind-the-scenes talks with the Finance Ministry. Both firms have struggled to restore revenue growth after deep cuts to their investment banking units — a task made more difficult by a sluggish economy that has pushed back expected interest rate rises.
Merkel’s government is likely to keep the holding in Commerzbank if the banks go through with the merger. That would preclude the politically perilous option of burdening German taxpayers with losses from selling shares the government acquired during a 2009 bailout.
The lenders are said to be working with investment banks to evaluate a combination. The structure of the resulting, enlarged bank is still unclear, with asset sales and fundraising among the possible options. Deutsche Bank expects to spend the next month in negotiations, a person briefed on the talks has said.
Merkel also said that private parties involved are best placed to take the decision because they face “the challenges, chances and risk.”
Kukies, a former Goldman Sachs banker, cancelled a speech in Frankfurt, which is home to both banks and their most important regulators. Those watchdogs, meanwhile, signaled the creation of a new national banking champion may not be relevant in their assessments of any deal.
“The term ‘national champion’ isn’t a category supervisors use,” said Joachim Wuermeling, a top Bundesbank official who also sits on the European Central Bank’s oversight arm. Regulators don’t base their decisions on what they or others think the banking industry should look like and they don’t let national interests shape their actions, he said.
That echoes comments from Andrea Enria, who leads the ECB’s supervisory arm. “I don’t particularly like the idea of national champions, of European champions,” he said in an interview with the Financial Times published on the ECB’s website. “If there are foreign banks, foreign investors, bringing their expertise, their capital, into your jurisdiction, that should be welcome.”
Their views matter because bank mergers require the ECB’s approval. Investors aren’t sold yet either and the evaluation
of a tie-up follows a series of failed turnaround plans by the companies.
“Only the parties involved can evaluate this,” transaction, Merkel said. “It is nothing new that we have consolidation in the European banking market. But personally I will wait for what the economic actors will have to say and will not express an opinion.”
Deutsche Bank tie-up could put 10k jobs at risk
London’s Brexit exodus was supposed to boost the number of finance jobs in Frankfurt. Now, a potential merger between Deutsche Bank AG and Commerzbank AG puts the gains at risk.
“In Frankfurt alone, between 4,000 and 5,000 jobs could be cut in a merger,” said Stephan Szukalski, head of the DBV union and a member of Deutsche Bank’s supervisory board. Stefan Wittmann, a Verdi union representative who is on Commerzbank’s supervisory board, said that between 8,000 and 10,000 Frankfurt jobs are in danger. “This is the result of a preliminary analysis that we have made,” he told Bloomberg.
Job cuts of this magnitude would probably be difficult to be offset by positions which are relocated from London to Frankfurt, according to a survey conducted by Bloomberg this week. Lobby group Frankfurt Main Finance, for example, expects an orderly Brexit to result in 10,000 new jobs in Frankfurt. Helaba, a lender based in the city, sees 8,000 added positions over the years, while the Association of Foreign Banks in Germany puts the estimate at 3,000 to 5,000.
According to Deutsche Bundesbank, number of employees at banks in Frankfurt remained almost constant in recent years. In the summer of 2018, it stood at 63,100.
“Our current forecast for the end of 2020 sees a total of 65,000 employees. This includes two developments: on the one hand, a positive Brexit effect and, on the other, continued consolidation of the banks in Frankfurt,” said Gertrud R. Traud, chief economist of Helaba.