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FINANCIALS: DBK Looking To Spoil CBK-UCGIM Deal. Damages Spread Covergence.

FINANCIALS
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Commerzbank (CMZB: Baa2 pos/BBB) – interferencefrom Deutsche (DB: Baa1/BBB/A-) would make bid less likely and therefore UCGIM-CMZB spread convergence less likely, too, we feel. Move highlights the politicised nature of cross-border banking deals.

  • BBG is reporting that “Deutsche Bank Mulls Options to Hinder Orcel’s Commerzbank Move” which could include buying CMZB equity from the German government. Reportedly, DBK is still opposed to a full takeover, having held talks more than once in the past.
  • DBK-CMZB would be a logical move from an industrial perspective but DBK still has much internal restructuring to do, the additional execution risk of a big in-market merger would not be insignificant. Like the unions’ opposition to UCGIM’s takeover, the job losses and branch closures here would likely be even greater, triggering a tricky political situation, even if the German government may desire a greater national champion than DBK on its own.
  • UCGIM and CMZB spreads should converge as deal likelihood increases, with the opposite being true here, if DBK becomes a spoiling party. This could eventually leave CMZB in the same place as the start – alone. This does also highlight the highly politicised nature of any cross-border banking merger, a key barrier to a greater banking union around the EU, we feel.
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Commerzbank (CMZB: Baa2 pos/BBB) – interferencefrom Deutsche (DB: Baa1/BBB/A-) would make bid less likely and therefore UCGIM-CMZB spread convergence less likely, too, we feel. Move highlights the politicised nature of cross-border banking deals.

  • BBG is reporting that “Deutsche Bank Mulls Options to Hinder Orcel’s Commerzbank Move” which could include buying CMZB equity from the German government. Reportedly, DBK is still opposed to a full takeover, having held talks more than once in the past.
  • DBK-CMZB would be a logical move from an industrial perspective but DBK still has much internal restructuring to do, the additional execution risk of a big in-market merger would not be insignificant. Like the unions’ opposition to UCGIM’s takeover, the job losses and branch closures here would likely be even greater, triggering a tricky political situation, even if the German government may desire a greater national champion than DBK on its own.
  • UCGIM and CMZB spreads should converge as deal likelihood increases, with the opposite being true here, if DBK becomes a spoiling party. This could eventually leave CMZB in the same place as the start – alone. This does also highlight the highly politicised nature of any cross-border banking merger, a key barrier to a greater banking union around the EU, we feel.