Deutsche Bank’s CEO Addresses Speculation on M&A Activity

Deutsche Bank CEO Christian Sewing has dismissed the notion of prioritising merger and acquisition (M&A) activities for his group, dispelling recent speculation surrounding the potential merger with domestic rival Commerzbank. While both German lenders abandoned a merger plan in 2019, concerns about bank profitability and rumours of the German government contemplating the sale of its stakes in companies have reignited talks of a possible tie-up.

Despite the German government retaining a 15% stake in Commerzbank, recent reports suggest Finance Minister Christian Lindner may be open to disposing of it. A merger between the two major banks could result in a combined entity with approximately $2 trillion in assets. However, Deutsche Bank’s comparatively low valuation, trading at around 12 euros per share, poses challenges, as a significant portion of assets may need to be marked down.

In an interview with CNBC at the World Economic Forum in Davos, Switzerland, Sewing appeared to downplay the rumours, emphasising that M&A is not a top priority for the bank at present. He highlighted the importance of meeting specific preconditions, particularly from a regulatory standpoint and the finalisation of the European Banking Union, established in 2014 to ensure stability in the bloc’s banking and financial systems.

Sewing acknowledged that while M&A in the banking industry might be inevitable in the future, certain conditions must be met. He emphasised the impact of sharply increased interest rates and the need to consider fair value gaps in mortgage books. Consequently, Sewing stated that pursuing M&A is not a priority for Deutsche Bank in the current year.

He concluded by expressing the bank’s focus on its own business and the exploration of smaller add-ons, citing the recent example of the acquisition of Numis. Sewing’s remarks underscore the cautious approach Deutsche Bank is taking amid ongoing industry and economic dynamics.