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The protracted takeover saga between Deutsche Bank and Commerzbank seems to be coming to a head, having already defied the conventional wisdom of corporate M&A battles. 

The potential suitor — Deutsche Bank — is the one dithering, while the target — Commerzbank — is keen. 

The outcome will be decided by eight men who all have very different agendas.

The politician: Olaf Scholz

German finance minister

Olaf Scholz © AP

Germany’s finance minister is a pivotal character in the saga. Mr Scholz is a centrist Social Democrat with the ambition to become Chancellor. 

The former mayor of Hamburg, a trading city, is convinced that Germany needs a “national champion” in banking strong enough to support the country’s corporations. 

“We will only be able to seize our global opportunities if we have an efficient financial sector,” Mr Scholz said last year, calling for an industrial policy focused on strengthening banks. 

With a 15 per cent stake, the German government is the single largest shareholder in Commerzbank. The finance minister is keen to shore up both lenders ahead of the next recession, according to people familiar with his thinking. 

Together with his deputy Jörg Kukies, the former co-head of Goldman Sachs in Germany, Mr Scholz is pressuring Deutsche Bank to come to a decision on merging with Commerzbank. 

A domestic deal is the government’s first choice, people familiar with the matter say. However, should Deutsche Bank decide against this, Berlin is threatening to look for a European buyer for Commerzbank, such as BNP Paribas and Société Générale of France or the Dutch ING. 

The veteran banker: Paul Achleitner

Deutsche Bank supervisory board chairman

Paul Achleitner, chairman of Deutsche Bank's supervisory board © Reuters

Deutsche Bank’s chairman has been one of the earliest and staunchest supporters of a merger. 

Since taking on the job in 2012, Mr Achleitner has gone through three chief executives and overseen a 73 per cent drop in the share price. The pre-tax profit of Deutsche’s all-important investment bank collapsed 87 per cent during that time. 

With potential annual cost synergies of €2bn and a 20 per cent share in the German retail market, a tie-up could in theory help the bank to earn its cost of capital. 

A key argument by Mr Achleitner, who also sits on the boards of Daimler and Bayer, is that Commerzbank’s large retail deposits of €290bn would help to lower Deutsche Bank’s funding costs, which have gone up in recent months. High funding costs erode its profit margins and undermine the trust of clients in its investment bank.

Mr Achleitner — the Austrian-born former head of Goldman’s German operation — is also attracted to a grand vision of Deutsche Bank as the leading alternative to US-based universal banks such as JPMorgan Chase.

He has a history of grand deals, having helped to engineer Allianz’s ill-fated takeover of Dresdner Bank in 2001 when he was the insurer’s chief financial officer. 

The adviser: Matt Zames

President and senior managing director of Cerberus

Matt Zames © Bloomberg

JPMorgan’s former chief operating officer, who last year joined private equity group Cerberus, would welcome a deal under the right circumstances.

Cerberus is one of the biggest investors in both Deutsche Bank and Commerzbank, with stakes of 3 and 5 per cent respectively. The private equity group sits on paper losses of about €600m from its investments in the two German lenders.

Mr Zames is also advising Deutsche Bank on restructuring.

Unfazed by the potential execution pitfalls of a merger, Cerberus is convinced its own experts led by Mr Zames can guide the combination to success, according to people briefed on its thoughts. 

The target: Martin Zielke

Chief executive of Commerzbank

Martin Zielke © Reuters

While trying to keep a low profile on the matter in public, Commerzbank’s chief executive is another advocate of a quick deal. 

In February, Mr Zielke called speculation about consolidation “understandable” given the poor performance of German banks.

Behind closed doors, he argues that due to Deutsche Bank’s historically low share price, Commerzbank shareholders would get a relatively good deal. 

The smaller partner would account for a third of the combined lender’s market capitalisation, compared with a long-term average of about a quarter. 

Moreover, a tie-up with its main domestic rival is seen as preferable to the prospect of becoming the target in a cross-border deal, which would turn Commerzbank into the German annex of a larger foreign lender without any strategic influence.

Mr Zielke, who started his career as an apprentice at Deutsche Bank but has worked for Commerzbank since 2002, was last month forced to admit that most of his performance targets were out of reach because of persistently low interest rates and tough domestic competition. 

The investor: Hamad bin Jassim bin Jaber Al-Thani

Former prime minister of Qatar

Hamad bin Jassim bin Jaber Al-Thani © AFP

The former prime minister of Qatar — known by his initials HBJ — and his cousin Hamad bin Khalifa Al-Thani together hold 6.1 per cent of Deutsche Bank’s shares and are among its largest shareholders.

A deal would need their support. According to people familiar with their thoughts, both are not yet convinced as it would not address Deutsche Bank’s most pressing problem — its struggling corporate and investment bank. 

Another concern is that Deutsche Bank’s continuing integration of Postbank, the German retail bank it acquired almost a decade ago in an ill-fated transaction, could be derailed by a merger with Commerzbank. 

A third worry is that both lenders are using dated and inefficient IT systems which are not easily integrated. 

Several other big shareholders told the Financial Times that they have similar concerns. 

The regulator: Andrea Enria

Head of the supervisory board of the European Central Bank

Andrea Enria © Reuters

The eurozone’s chief banking supervisor, together with his colleagues at Germany’s Bundesbank and the country’s banking regulator BaFin, play a crucial role. 

The European Central Bank has for a long time argued in favour of more cross-border consolidation in banking to bolster the monetary union. 

Several of Deutsche Bank’s regulators say privately they would not block a deal that was backed by the banks’ shareholders and endorsed by the German government. 

There are preconditions, though. The new lender needs to have a convincing business model and a realistic strategy to quickly execute the merger. Moreover, the regulators stand ready to closely monitor the integration progress. 

Even if regulators approved a deal, they could undermine it by demanding that the enlarged bank has significantly higher capital buffers as it becomes even more important for the stability of the global financial system. 

This could weaken the financial case for the deal. 

The union boss: Frank Bsirske

Chairman of Verdi

Frank Bsirske

The boss of Germany’s service sector union Verdi is a member of Deutsche Bank’s supervisory board, where employee representatives hold half of the seats — as they do in most listed German companies.

Verdi staunchly opposes the merger idea, as it could put at least 20,000 German jobs on the line. 

“The public discussion [about a merger] is anything but helpful with regard to the challenges both banks are facing at the moment, as the employees are constantly distracted,” says Jan Duscheck, another Verdi representative who also sits on Deutsche Bank’s supervisory board. 

If all employee representatives on Deutsche’s supervisory board vote against making an offer for Commerzbank, the chairman Mr Achleitner may be able to carry the deal over the line with his casting vote — provided he can convince all shareholder representatives to back the transaction. 

But such a brute-force approach would be at odds with Germany’s co-operative tradition and could poison the relationship with employees for a long time. Alternatively, management could buy the union’s support in a costly deal by promising to limit job cuts and to pay generous redundancy packages — which, in turn, would make it harder to realise the synergies. 

The predator: Christian Sewing

Chief executive of Deutsche Bank

Christian Sewing © Reuters

Deutsche Bank’s chief executive holds the decisive vote. He recently dropped his fundamental opposition against evaluating a tie-up at this point in time.

In mid-February, he asked Deutsche Bank’s executive board for a mandate to informally sound out the options in talks with the German government and Commerzbank. 

Mr Sewing is under pressure as persistently low interest rates hurt its domestic business while its investment bank continues to lose ground in a weak overall market, forcing him to consider alternatives to his standalone turnround plan.

According to people familiar with his thoughts, this was driven by the concern that the German government may otherwise engineer the sale of Commerzbank to a foreign rival. 

If that happened, Deutsche Bank would lose the option of domestic consolidation and be left grappling with a new, stronger competitor at home. 

However, Mr Sewing has established a precondition for formal and detailed talks about a tie-up. According to people familiar with the matter, these will only start if politicians — in particular Social Democrats around Mr Scholz — informally promise not to back union opposition against the brutal jobs cull needed to make the merger work. This is already proving a big ask.

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