Commerzbank and germany’s Deutsche Bank said Thursday they were halting talks on a merger which aimed to create a more powerful global banking player, saying it might be risky and expensive.
Deutsche Bank CEO Christian Sewing explained in a statement that that the combination”wouldn’t have created sufficient advantages to offset the further implementation risks” in carrying out this type of sweeping combination.
He said that a deal demanded the banks to build more fiscal buffers against losses and could have involved restructuring costs.
Deutsche Bank made a profit after three straight years of losses. The business has paid billions for past misconduct, such as a $7.2 billion settlement with an U.S. Justice Department for deceiving investors in the sale of mortgage-backed securities ahead of the international financial meltdown, in 2006-7.
Commerzbank, that was bailed from the German government in 2009, has worked to wind down billions in shipping loans. The government still owns a stake of over 15 percent.
Employee representatives and unions also balked in the merger idea, which might have meant more job cuts. Even the Ver.di union said that around 30,000 jobs may be lost.
The government push supporting the merger comes as cabinet ministers have voiced support for the production of companies they believe would be able to compete on a global scale.
Deutsche Bank has been about the 2018 list of over two dozen internationally significant banks compiled from the international Financial Stability Board, along with Wall Street institutions like Bank of America, JP Morgan Chase and Citigroup; Commerzbank, whose company is focused on lending to companies in Germany, failed to make the list.
The merger might have needed to pass muster in the European Central Bank who’d be concerned with the fiscal solidity of all the bank than with international ambitions. Andrea Enria, who heads the supervisory branch, has been quoted March 19 from the Financial Times as saying,”I don’t particularly enjoy the concept of national champions, of European champions,” while not citing any specific bank.
Separately, Deutsche Bank said it hopes to report Friday that its first-quarter internet income was approximately 200 million euros ($224.2 million) and net revenue 6.4 billion euros.