Deutsche Bank CEO Wants Cross-Border M&A But Says Time Not Ripe

(Bloomberg) -- Deutsche Bank AG Chief Executive Officer Christian Sewing played down the prospect of a merger with local rival Commerzbank AG, saying cross-border deals offer the best future for European banks.

“The real chance of consolidation lies in crossing national borders in Europe,” Sewing told a conference audience composed of senior business people and lawmakers in Berlin, including Federal Economy Minister Peter Altmaier. “Only then is it possible for true European champions to emerge.” However, he added that such deals were “hardly” commercially attractive “at the moment.”

Sewing played down as “speculation” the news, reported exclusively by Bloomberg last week, that a combination with Commerzbank AG has emerged as the preferred medium- to long-term strategic option among Deutsche Bank’s top echelons. He reminded his audience that Germany needs “strong” domestic banks.

A big current obstacle to a deal with Commerzbank, or with any other bank, is Deutsche Bank’s own depressed valuation. Its share price has fallen almost 15 percent since Sewing replaced John Cryan as CEO in April. Despite that, Sewing said he’s making “very good progress” turning the bank around.

The changes unveiled by Sewing have yet to convince investors. Many analysts have expressed fears that his planned cuts to headcount will inevitably also hit the bank’s capacity to generate revenue and profit. That was one risk highlighted by S&P Global Ratings at the end of May when it downgraded Deutsche Bank’s long-term debt to BBB+ from A-, a step that left the German lender’s rating below those of rivals such as BNP Paribas SA and UBS Group AG.

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