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Deutsche Bank and Commerzbank begin merger talks

Germany based Deutsche Bank and Commerzbank have confirmed that they are in talks about a possible merger.

Post-merger, the combined entity would have 1/5th of Germany’s High Street banking business and control € 1.8 trillion of assets. It would be the 3rd largest bank in Europe after HSBC and BNP Paribas, with a market valuation of € 25 billion.

The Government which holds 15% stake in Commerzbank, wants a national banking champion to support its export-led economy, majorly known for its cars and machine tools.

The merger would result in massive cost savings, as lot of branches will close down. Together the two banks employ 140,000 people globally. The proposed merger is likely to face opposition from Unions who fear that more than 10,000 jobs could be lost.

Both the banks have issued separate media statements following meetings of their Management Board. The Deutsche Bank statement read, “In light of arising opportunities, the management board of Deutsche Bank has decided to review strategic options.”

Speaking on the occasion, the CEO of Deutsche Bank – Christian Sewing said, “Consolidation in the German and European banking sector is an important topic for us. We have to assess how we want to play a part in shaping it.”

Responding to queries of employees, he wrote a letter to them in which he said, “What is important to me is that we will only pursue options that make economic sense, building on the progress we made in 2018.”

The Boards of both the banks are scheduled to meet again on Thursday, March 21, 2019. Deutsche Bank’s is in the process of reducing costs and minimizing the headcount as part of an overhaul exercise.

Besides, Deutsche Bank has not been performing well and has suffered huge losses at its United States (U.S.)  investment banking operations. It posted an annual profit last year for the first time since 2014. It lost € 409 million in the October-December quarter of 2018. However, the bank said that the major cause of the losses challenging financial markets, especially for its fixed income trading division. For the records, Commerzbank has € 30.8 billion of debt securities and a market value of € 27.7 billion.

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