Deutsche Bank AG chief executive officer John Cryan yesterday said that Germany’s largest lender is looking to shrink in size, when asked about a media report that it considered merging with rival Commerzbank AG.
“Part of the work we’re doing is to make our bank a bit smaller, to make it a bit simpler,” Cryan said at a conference in Frankfurt, when asked whether the lender is looking for a merger partner.
Germany’s Manager Magazin reported earlier yesterday that Deutsche Bank’s considerations were “only of a theoretical nature” and at a very early stage.
Deutsche Bank, which runs Europe’s largest investment bank, has lost about 42 percent in market value this year, as Cryan struggles to shore up capital and reverse losses.
As part of his restructuring plan introduced last year, the CEO announced thousands of jobs cuts, sold risky assets and suspended dividend payments.
“A merger between the two is unlikely,” said Chris Wheeler, a London-based analyst at Atlantic Equities. “There would be major competitive concerns. It would be looked upon by many people as negative news.”
Deutsche Bank has put a planned initial public offering of its German Postbank consumer division on hold, with Cryan citing market conditions as one of the reasons.
The sale was part of Cryan’s plans to raise capital buffers, hurt by fines tied to past misconduct and restructuring costs.
Germany’s largest lender has said that it might not be profitable this year.
Commerzbank earlier this month forecast a drop in full-year net income after previously saying that it would probably fail to reach its goals for a return on equity — a measure of profitability — and costs as a share of revenue this year.
“We’ve achieved a lot to stabilize the bank over the past few years,” Commerzbank CEO Martin Zielke said at the conference hosted by Germany’s Handelsblatt newspaper.
“The question is to what extent banks will be able to reshape their models toward profitable growth. That’s not an easy task,” he said.
Cryan and Zielke both agreed that there needs to be a consolidation among German lenders to help bolster profitability across the industry.
“There are simply too many banks in Germany,” said Cryan, who took over as sole CEO earlier this year. “There has never been a major move toward mergers. The result — fewer economies of scale, more competition, higher price pressures.”
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