German unions sound alarm at Deutsche and Commerzbank merger talks

Monopoly body fears plan could create a too-big-to-fail institution

Outside view of the Deutsche Bank headquarters in Frankfurt, Germany. Photograph: Ralph Orlowski/Reuters

Outside view of the Deutsche Bank headquarters in Frankfurt, Germany. Photograph: Ralph Orlowski/Reuters

 

in Berlin

German unions and its monopolies commission have sounded the alarm over news that Deutsche Bank and Commerzbank have begun preliminary talks about a possible merger. Unions fear up to 30,000 job losses should Germany’s two largest banks - 15th and 53rd in the world by assets - throw in their lot together. Meanwhile the monopoly body fears the plan could create a too-big-to-fail institution for which – in case of another bank crisis – the taxpayer will inevitably be the lender of last resort. Monopoly commission head Achim Wambach said the banks’ limited business overlap meant there was little stood in the way of a merger from a competition perspective.

Plan

”There are considerable signs that the cartel authorities would green-light this merger, with some conditions,” he said. “But a merger would possibly create a new threat for the financial world, namely the rise of a systemic risk.” A spokesman for Deutsche Bank insisted the talks were only exploratory and whether they would proceed would depend on whether executives from both banks saw a viable integration plan that made economic sense. ”These talks could end either way,” the spokesman added. Analysts are ambivalent about whether merging Germany’s two largest banks, each wracked by structural and identity problems, will create a less problematic merged corporate entity. Revenues at Deutsche Bank have declined for the last eight quarters and, despite a bounce on merger speculation, its share price is down 173 per cent from a high in 2007. No one expects the bank to hit its profit goals this year under chief executive Christian Sewing, Deutsche’s third CEO in three years. Commerzbank is halfway through a four-year turnaround plan and the German state still holds a 15.6 percent stake, a decade-old legacy of the banking crisis. Neither bank are generating any profit at present, and Germany remains one of the most over-banked markets in Europe. A merger would address that fragmentation, boosting their combined market share, especially in retail and corporate banking. In addition a merger would make Commerzbank retail deposits, a source of lost-cost funding, available to Deutsche Bank

Bounce

Of particular interest to investors – prompting a share bounce in trading on Monday - are possible cost savings through job cuts and branch closings. At present the two companies, taken together, employ 78,000 people and operate 2,400 branches. Two powerful unions have come out against the possible merger: as well as job losses, they fear a loss of influence on the banks’ supervisory boards, where they fill half the seats. Chancellor Angela Merkel’s chief of staff, Helge Braun, has insisted there was no “systemic issue” created by such a merger but insisted there was “no single political motivation to push this merger -- it has to be a corporate one”. The insistence of a political hands-off approach is at odds with rumours of a merger building for months in Berlin, and parliamentary records showing finance minister Olaf Scholz and a key deputy met Deutsche Bank representatives on average once a fortnight last year.