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DBK-CBK Merger Talks May Reopen; Not An Obvious Credit Positive

FINANCIALS SECTOR
Reuters is reporting Commerz-Deutsche Bank merger talks may be reopened as German govt looks to exit remaining 15% stake in CBK.


  1. In-market consolidation is generally viewed as the best option for a bank and DB has looked at Commerz in the past. DB is about twice the size so would be a takeover. DB bought Deutsche Postbank over a decade ago and has only just completed the merger synergy process; this highlights the issue with such deals in Germany; some of Europe's strictest labour laws.
  2. Deutsche has been plagued with an underperforming inv bank (since buying Bankers Trust over 20yrs ago) but has done much to both shrink and de-risk the business in the last five years, regaining some credibility with investors, so there might be some appetite here.
  3. German domestic banking is a problem child with a system that rarely covers an economic cost of capital. CBK (rated A2/A-/wd) and DBK (rated A1/A/wd) similarly rated but the reduction in IB earnings within the mix would offer some credit support but only if there is real political impetus to help mgmt drive out cost from the merging domestic retail businesses.

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