Deutsche Bank and Commerzbank are reportedly revisiting merger talks

The backstory: Back in 2019, there was this big talk about Deutsche Bank and Commerzbank teaming up for a mega-merger, with the aim to fix some of their shared problems, like low-interest rates and years of poor returns. The idea was that if they joined forces, it would possibly save money, make things more efficient and create a stronger financial institution. 

Even the German government, owning a chunk of Commerzbank, signaled it was all in for this merger, seeing it as a move that could help these struggling banks get back on their feet. Merging the two, which are Germany’s two largest listed lenders, would create the Eurozone’s second-largest lender by assets. But long story short, the talks hit a dead end because both banks thought the risks were bigger than the rewards.

More recently: Alexander Wynaendts, the Supervisory Board Chairman at Deutsche Bank, mentioned in November that the bank is open to growth options through mergers and acquisitions. Essentially, it's preparing to seize good opportunities when they come along.

The development: Five years after the flop of the Deutsche Bank-Commerzbank merger, there's speculation that the idea might be back on the table. The bank is said to be thinking about buying other banks, with Commerzbank and ABN Amro reportedly on the radar. Finance Minister Christian Lindner is also reportedly open to considering the sale of the government's 15% stake in Commerzbank at a later stage, according to an inside source. The merger would help Deutsche Bank diversify away from unreliable investment banking earnings and make it more stable in the longterm, which could also help the German government say yes to selling its stake. On the market front, Commerzbank shares went up a bit on Monday, and Deutsche Bank's shares took a slight dip. 

Key comments: 

"The rise and normalisation of interest rates will refresh overdue consolidation plans," said Beat Wittmann, chairman of Porta Advisors, a Swiss boutique advisory firm. "In Europe, domestic deals are still easier than international ones."

"The chances of a sizeable transaction are relatively low in the near term given the many hurdles," said Anke Reingen, an analyst at RBC Europe in a note to clients. But she added that press speculation and previous comments by the bank have made the move more likely.

"Deutsche Bank will continue to review all alternatives to improve long-term profitability and shareholder returns," said Deutsche Bank in 2019 after the first merger talks were abandoned.