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Deutsche Bank Trades Higher After Confirming Merger Talks With Commerzbank

Benzinga logo Benzinga 3/18/2019 Jayson Derrick
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Shares of Deutsche Bank AG (NYSE: DB) gained 5 percent Monday morning after confirming it's in merger talks with fellow German-based bank Commerzbank.

What Happened

Deutsche Bank and Commerzbank, the two largest German banks, each confirmed in statements over the weekend they're discussing a merger. A source close to the matter told CNBC the respective boards met to discuss a combination and this suggests the two are now working at a faster pace to finalize a combination.

The German government, a 15-percent shareholder of Commerzbank, has been pushing for a merger given Deutsche Bank's inability to generate sustainable profits over the past 10 years, CNBC said.

Why It's Important

The combination of the two banks is expected to create a national giant that can support Germany's export-led economy, including cars and machinery. Stefan Mueller, CEO of the German Institute for Asset Allocation, told CNBC the "only person" who likes the deal is the minister of finance who may in fact lose his title in the upcoming national elections.

The government is also acting as a shareholder in Commerzbank which creates "lots of question marks," Mueller said.

What's Next

Mueller said he's certain the merger between the two banks will proceed but the integration process could take multiple years. But if the combined entity is able to "produce some good news here and there," stakeholders will fully understand the true potential.

Deutsche Bank traded around $9.32 per share, up 4.9 percent a time of publication.

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