Following the confirmation of talks of a merger by Deutsche Bank and Commerzbank, there were voices of concerns arising out of workers unions, Chancellor Angela Merkel’s office and top shareholders on Monday.
A warning from the unions feared job loss of about 30000 because of the merger of the two largest banks of Germany which prompted a comment about the government scrutinizing the deal from Merkel’s chief of staff.
The obstacles to combining the banks were underlined in the concerns. The two banks had confirmed on Sunday that they were holding talks with each other for a merger after months of pressure from Berlin. The German government had been pushing for the bead deal because of concerns about performance of Deutsche Bank which has been struggling to make sustained profits ever since the 2008 global financial crisis.
It would be “difficult” if there were thousands of job cuts because of the merger, Chancellery Chief Helge Braun told Bild newspaper, and warned that the government was “never passive when it comes to deals of such magnitude”.
Globally, there are about 140000 employees of the two banks combined – 91,700 employed with Deutsche and 49,000 at Commerzbank. The merger would give the new combined entity one fifth of the total retail banking market of Germany.
There was positive reaction in the market because of the confirmation of the merger of the two banks following months of speculations despite the worries about huge job losses. Shares in Deutsche Bank were up 5.0 percent at 1216 GMT while Commerzbank traded 6.7 percent higher.
The supervisory boards of both banks are scheduled to meet on Thursday and merger would most likely top the agenda of the meetings.
But according to a Reuters report, the merger was not welcomed by two top shareholders in Deutsche Bank and one of the investors reportedly questioned the logic as well as the timing of the merger. .
“There is no obvious reason why these two banks should be merged,” reported Reuters quoting a source close to another shareholder.
There can be efficiencies achieved by a well executed merger, said international credit ratings agency Standard & Poor’s, which downgraded Deutsche Bank last year, but also warned that that a deal would “entail significant uncertainties and risks”.
It said that the process of merger would mean “several more years of significant internal restructuring” in the banks while the competitors would move forward, in addition to multiple regulatory and antitrust risks. The banks have “patchy track records in executing strategic programs,” S&P said.
The German government, which owns over 15 per cent of Commerzbank after it injected money in it in a bailout program, is keen to see a large national bank in Berlin which could support the export oriented economy of the country – driven mainly by cars and machine tools exports.
But the major hurdle can by the job losses.
According to a representative of German union Verdi, who is also a supervisory board member at Deutsche Bank, told n-tv broadcaster that there can be job losses of as much as 30000 because of the merger.
Verdi’s Jan Duscheck said in comments published by the TV station that most of the anticipated job losses would happen in Germany which includes loss of 1000 jobs in the short term.
“A possible merger would not result in a business model that is sustainable in the long term,” Duscheck said.
(Adapted from WallStreetReporter.com)