Christian Sewing, CEO of Deutsche Bank, acknowledged that a recession in Germany was inevitable and urged leaders to accelerate its decoupling from China.
Dennis Balibus | Reuters
Deutsche Bank Chief Executive Christian Sewing said on Thursday that merger and acquisition activity was not a priority for his group, as speculation resurfaced over the future of local rival Commerzbank.
The two German lenders abandoned a merger plan in 2019, but concerns about the banks’ profitability, and reports that the German government is considering selling some of its stakes in the company, have reignited whispers about a possible merger in recent weeks.
The state still owns a 15% stake in Commerzbank, but Reuters reported earlier this week that Finance Minister Christian Lindner was open to getting rid of it.
A merger of Germany’s two largest banks would create a combined entity with assets of about $2 trillion, although Deutsche Bank’s low valuation could complicate any such move. The bank is trading at around €12 per share, a small fraction of its book value, and a significant portion of assets will have to be written down.
Speaking to CNBC on the sidelines of the World Economic Forum in Davos, Switzerland on Thursday, the seamstress appeared to pour cold water on the rumours, at least for now.
“I wouldn’t say it’s my top priority, to be honest. I’ve always said for years that mergers and acquisitions in the banking industry, especially in Europe, have to happen at some point, but more importantly, there are certain preconditions,” Sewing said. “The preconditions have been met from a regulatory point of view, and the banking union has been completed.”
“Obviously, in terms of the sharp increase in interest rates, you have to think about the fair value gaps given the mortgage books of a lot of banks, so I don’t think that’s a priority for this year.”
The European Banking Union was created in 2014 and seeks to ensure the stability of the bloc’s banking and financial systems.
In December, the Italian Chamber of Deputies voted to reject reforms to the European Stability Mechanism, the eurozone’s bailout fund, which all other eurozone countries had agreed to.
This left the bloc unable to implement part of the banking union legislation which Eurogroup President Paschal Donohoe described as “an essential element of our common safety net”.
“So, we are focusing on our own business,” the tailor concluded. “If there are possibilities and options in this particular business to do one or another of the smaller additions, as we did with Numis, then obviously we are looking at them.”