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Deutsche Bank and Commerzbank: no marriage between the two "zombie banks"

After six weeks of discussions, the decision finally fell in the morning of Thursday: the merger between Deutsche Bank and Commerzbank will not happen. The announcement was greeted with relief in Germany, particularly by the unions, the shareholders of these two institutions, and the markets. As soon as the announcement became official, Deutsche Bank shares rose by 4% at the Frankfurt Stock Exchange.

The operation, supported by German Finance Minister Olaf Scholz (SPD), frightened many of the players in the sector. And the negotiations were, it seems, so slow that the British weekly The Economist wrote three weeks ago, in a murderous article about the "zombie banks of Europe": "Deutsche Bank and Commerzbank are conducting merger negotiations with competence and clarity on objectives worthy of the British Brexit negotiators." For different reasons, Deutsche Bank and Commerzbank are weakened. "These are two lame ducks, comments Jochen Bigus, Professor in the Department of Economics and Business Administration at the Free University of Berlin. Now, two lame ducks advancing together will never be able to go faster. "

Too complex, too expensive, too risky, this merger of the first two German banks would also have had a significant social cost. The German trade union Verdi reported 30,000 job cuts worldwide, including 10,000 in the city of Frankfurt alone, home of both firms. "This deal would have been a disaster for the employees," commented Thursday at the Reuters agency Gabriele Seum, Commerzbank's works council.

"Too big to fail"

"The German industry, active worldwide, needs competitive credit institutions", However, Finance Minister Olaf Scholz recalled. He called for the creation of a national banking giant, entrusted the case to his secretary of state in charge of Europe and financial markets, Jörg Kukies. The latter was, prior to his controversial appointment in 2018, co-chairman of the Goldman Sachs board in Germany and Austria.

Read also Jörg Kukies, or the arrival of Goldman Sachs at the German levers

His presence in the talks was talked about. Thus, ARD journalist Bettina Meier ironically ironed: "Instead of incubating the banking lobby, Scholz should not lose sight of his real target: German taxpayers. […] The merger of Deutsche Bank with Commerzbank would have created a large bank which, in the event of a crisis, would have upset the financial system, at least in Germany. It would then have been up to the state to intervene in a rescue operation. "Too big to fail" – too big to fail – what was that already? Oh yes, during the financial crisis, the big banks had to be saved by the government. But I think about it: it was the case of Goldman Sachs. "

Deutsche Bank is the subject of the greatest concern. Former Green deputy Gerhard Schick, head of the Finanzwende citizen movement – Germany's Finance Watch branch founded on September 15, 2018, ten years after the collapse of Lehman Brothers – recalls that Deutsche Bank, one of the top four banks systemic in the world, "Is a bad patient. Since the beginning of 2018, its shares have lost nearly half of their value, risk premiums on loans are twice as high as those of other banks. His illness is called unprofitability and he lacks an economic model for the future. "

"Skeptical"

Its market capitalization is "only" 16.1 billion euros – the institution has lost more than 50% of its value in 2018. The bank also suffered three years of losses in a row, from 2015 to 2018. Certainly , the trend reversed last year, but modestly. On Friday, the bank announced a net profit of 200 million euros for the first quarter of 2019. More encouraging figures even if, in general, "Since the financial crisis, the Deutsche Bank has suffered losses, or it is making too little profit. I remain skeptical about his future performances"Summarizes Jochen Bigus.

In addition, her name is mixed with many of the economic scandals of the time, from the case of money laundering related to Russia to that of the Estonian subsidiary Danske Bank, it is regularly threatened with financial penalties and is often searched.

The future of Commerzbank, which focuses on retail banking and financing of small and medium-sized enterprises, the famous Mittelstand, seems a little less gloomy: according to the trade press, the companies UniCredit (Italy) and ING (Netherlands) have already expressed their interest in this bank held at 15% by the German State following its rescue during the financial crisis.

Johanna Luyssen correspondent in Berlin

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