For the umpteenth time in several years, Germany’s two largest and most hamstrung banks could be on the road to a merger
Really this time?
Shares in Germany’s second-largest listed lender, Commerzbank (DE:CBKG), rose almost 5% at last check. Deutsche Bank (DE:DBKGn), Germany’s No.1 bank, were up 2.6%. Commerzbank shareholders would gain more bolt-on revenues than DB shareholders. Still, modest share price moves reflect a continuing lack of clarity.
Key M&A points:
- DB board has agreed to hold talks with CB on feasibility. Both banks stress discussions are early-stage and non-binding
- Pressure from Germany, which owns 15% of CB is rising
- Major U.S. holder Cerberus reportedly favours a tie-up, but key domestic investors are less convinced
- The logic of the deal is unclear: A 30% Commerz premium (about €11bn) would hit DB’s key capital ratio. Using DB stock would dilute shareholders again after a share sale two years ago. Both banks have sickly return on capital (DB’s just 0.5% in 2018; CB’s 3.4%). So, a merger wouldn’t automatically boost profits
Thoughts on Deutsche’s chart
DB has inched 10% off last year’s all-time lows though €8.24-€8.33 is now established resistance after attempts to break the zone in late-January and last week failed. €7.10-7.15 has been support for slightly longer. The clearest recent structure broke to the downside last week. So long as key resistance is unsurpassed, rallies are likelier to be sold than to gain traction.
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