Deutsche Bank and Commerzbank have started formal merger talks, but job losses, poor mergers in the past and existing issues have raised eyebrows.
— more than 13% of the two companies' combined workforces — says the chief of Germany's Verdi labour union, according to Reuters. The union says there's overlap between the firms' retail and business customer segments, arguing international deals would suit both firms better.
Both Deutsche Bank and Commerzbank have patchy deal histories. Deutsche Bank struggled to integrate Postbank, which it bought for €6.5 billion euros in 2010. Commerzbank's troubled takeover of Dresdner Bank in 2008 meant the financial crisis hit it harder, leading to two government bailouts. Yet mergers are to be expected in a nation with close to 1,600 banks,The mega-deal also comes at a difficult time. Both banks are navigating an economic slowdown in Germany — which nearly fell into recession at the end of last year — as well as the broader eurozone.
Deutsche Bank's sales fell and borrowing costs rose in the final quarter of 2018, and German officials raided its headquarters. It's unclear how absorbing Commerzbank will help Deutsche Bank's ailing investment banking arm, its main earnings driver. Financing the merger and appeasing regulators could also mean selling off assets such as DWS Group, Deutsche Bank's asset management business that has reportedly caught the eye of Allianz. Analysts think Deutsche Bank may need to raise about €8 billion to pull off the deal.
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