Deutsche Bank, Credit Suisse, UBS Give Impetus to Bank Deal Talk
Deutsche Bank CFO Signals Preference for Cross-Border Deals
(Bloomberg) -- Top executives from some of Europe’s biggest investment banks gave further impetus to talk of consolidation sweeping across the industry, saying it’s only a matter of time before more takeovers happen.
Deutsche Bank AG Chief Financial Officer James von Moltke on Tuesday signaled the German lender is interested in cross-border mergers when consolidation in European banking takes off. Sergio Ermotti, the chief executive officer of UBS Group AG, said the pandemic has made it clear that deals need to happen, comments that were echoed by his counterpart at Credit Suisse Group AG.
“We do expect consolidation to pick up” in European banking, von Moltke said at a virtual Bank of America Corp. conference.
Deutsche Bank Chief Executive Officer Christian Sewing has been saying for some time that he wants to be part of banking consolidation if and when it happens, but those statements have recently taken on added significance as the pandemic jumpstarted talks. In Spain, the boards of CaixaBank SA and Bankia SA recently approved a combination to create the biggest lender in the nation, and Italy’s Intesa Sanpaolo SA is taking over domestic rival Unione di Banche Italiane SpA.
At UBS, Chairman Axel Weber has drawn up his own wish list of possible partners, with Deutsche Bank among its most favored options, Bloomberg reported last week. Other banks on Weber’s list are BNP Paribas SA and local rival Credit Suisse.
“Over the last years, and last two years, the debate in Europe was focused on too-big-to-fail rather than too-small-to-survive,” UBS CEO Ermotti said at the conference on Tuesday. “Since Covid, things are crystal clear -- consolidation is inevitable. It is good for the market.”
He also said that financial regulators “are open and willing to consider” deals by banks.
Speaking at the same event, Credit Suisse CEO Thomas Gottstein echoed the expectation that bank mergers will pick up, while cautioning that regulatory hurdles remain, including for domestic takeovers.
“Cross-border mergers or even in-market mergers are more complicated than they used to be if you think about general adversity against too-big-to-fail and all the regulatory approvals needed,” he said.
Analysts have highlighted the regulatory hurdles any merger between the two biggest Swiss banks would face.
What Bloomberg Intelligence says
“A potential deal between UBS and Credit Suisse would face material antitrust scrutiny in Switzerland, where approval may be elusive, in our view. The outcome may hinge on how regulators choose to define the affected markets. An easier regulatory path to a merger may await in the EU and the U.K.”
Aitor Ortiz, banking analyst
UBS and Deutsche Bank briefly explored the idea of a merger in 2019. The talks, which didn’t proceeded beyond the initial stage, grew out of stalled negotiations to combine the firms’ asset management businesses.
Deutsche Bank’s leadership convenes this week for its annual strategy meeting where M&A discussions take place regularly and where the bank two years ago -- shortly after Christian Sewing had taken over as CEO -- opted for UBS as its preferred merger option. UBS remains the preferred medium-term partner for Deutsche Bank, though Sewing wants to see his firm’s stock price rise first, a person familiar with the matter has said.
UBS had similar strategy meetings where it discussed merger options last week, according to people with knowledge of the matter.
Sewing said in a Bloomberg interview in early July that his turnaround plan will eventually cause Deutsche Bank’s valuation to rise. “I always want to be in a position that I’m not the inferior one and the junior guy” in a deal, he said.
Von Moltke said that for Deutsche Bank at least, domestic deals look more challenging, citing the experiences gained from the bank’s unsuccessful takeover talks last year with Commerzbank.
Deutsche Bank has started scouting for smaller deals that could complement individual business units, he said The lender recently considered buying parts of the insolvent payments company Wirecard AG though it later withdrew its non-binding bid because it considered the price too high, people familiar with the matter have said.
The CFO also gave an upbeat outlook on the third quarter, saying that revenue gains in the investment bank have been “in line or ahead” of recent guidance from peers. U.S. investment banks Bank of America, Citigroup Inc. and JPMorgan Chase & Co. all gave indications of how much growth they expect in third-quarter trading revenue, with estimates ranging from less than 10% to as much as 20%.
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