Germany's Deutsche Bank, Commerzbank to hold talks on merger

Deutsche Bank in merger talks with Commerzbank

The announcement is an indication that efforts to combine Germany's two largest lenders are gaining pace.

Chancellery Chief Helge Braun told Bild newspaper that it would be "difficult" if thousands of jobs would be cut, warning that the government was "never passive when it comes to deals of such magnitude".

The merger of two massive German lenders - Deutsche Bank and Commerzbank - is being greeted with much fanfare in the markets.

Deutsche Bank CEO Christian Sewing announced the decision to the public on Sunday, acknowledging months of rumors regarding a potential merger, but not assuring a deal would take place.

Deutsche Bank has a market value of some 16 billion euros ($18.1 billion), while Commerzbank weighs in at about 9 billion euros.

Formal disclosure of talks increases the chances of concluding a tie-up that has always been the subject of speculation and surfaced in 2016 before both banks made a decision to focus on restructuring.

The German government remains Commerzbank's largest shareholder, with a more-than-15 percent stake, having bailed the bank out at the height of the 2008 financial crisis.

At the same time, Commerzbank pointed out that the outcome of the talks had not been decided as both parties are yet to study the possibility of such a move.

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Commerzbank has also found it hard to grow.

The German government, concerned over the performance of Deutsche Bank in recent months, is understood to have pushed for an answer on whether a merger could be possible.

The supervisory boards of both banks meet on Thursday when the merger is likely to be discussed.

"Some 20,000 or more jobs could come under fire", Bsirske said, adding that safeguarding jobs was a priority for Verdi, and that he expects tense discussions about this at both banks.

German officials fear that a recession or big fine, for example, could derail the bank's fragile recovery.

Other than Deutsche, Commerzbank is Germany's only remaining big publicly-traded bank, after a series of mergers. If an global rival snapped it up, that would increase competition for Deutsche on its home turf.

One of the biggest risks is how to fill what one German official has told Reuters will be a multi-billion-euro financial hole because a merger could trigger an adjustment to the valuation of some bank investments.

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