Deutsche Bank May Merge With Its Rival: Here's How It Will Look
(Bloomberg) -- Deutsche Bank AG and Commerzbank AG are said to be edging closer to a merger after past restructuring efforts failed to convince investors, but it’s still not clear how a combination would be structured or financed.
Estimates of how much capital Deutsche Bank would have to raise to acquire Commerzbank vary widely. Then there’s the question of whether the banks would be forced to sell some of their best-performing businesses, like Deutsche Bank’s asset management unit DWS Group.
Investment bankers will also be watching closely for any sign of a retreat from New York, London or Hong Kong. Deutsche Bank Chief Executive Officer Christian Sewing has repeatedly ruled out a withdrawal from the U.S., which is home to the world’s deepest capital markets. Could a merger change that stance?
With so many variables still unknown, here are five charts that show what we do know about a combined Deutsche-Commerzbank.
Pooling the assets of Deutsche Bank and Commerzbank would make the combined firm Europe’s fourth-largest lender with a 1.81 trillion-euro ($2.05 trillion) balance sheet, based on data from the end of December. Deutsche Bank’s retrenchment meant it lost that spot to Spain’s Banco Santander SA last year.
Deutsche Bank’s revenue has declined for three years running , with no end in sight. Adding Commerzbank’s earnings to the mix could take Deutsche Bank’s revenue to slightly above its 2012 peak of 33.7 billion euros, assuming clients stick around and the lenders don’t sell assets.
The banks would face upfront costs to combine their operations and fire staff, but the resulting savings could reduce their annual expenses by more than 2.2 billion euros over the longer term, according to the average of four analyst estimates compiled by Bloomberg. That’s still just a small fraction of their overall expenses.
Together, Deutsche Bank and Commerzbank employ about 140,000 people, more than half of whom are located in Germany. Eliminating a large chunk of those jobs could substantially reduce the costs of a merged bank. As many as 30,000 positions could be at risk if a deal is reached, people familiar with the matter have said. Deutsche Bank executives are looking for reassurances they’ll get government backing for job cuts as they consider going public with their merger discussions.
While a deal would leave only one German bank with global reach, the combined firm wouldn’t be dominant at home. A merged Deutsche-Commerzbank would control less than 10 percent of German bank branches and would still face competition from savings and cooperative lenders. Those firms aren’t under the same pressure to generate profits and they have ruled the market for retail banking.
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