Shares in Commerzbank AG could continue to surge ahead today as speculation grows that Germany's fourth biggest bank is in merger talks with Italy's Unicredito.
While Commerzbank declined to comment on the rumors, media and market speculation that the Frankfurt-based bank was preparing to take part in merger negotiations drove the bank's shares up by 3 percent to more than 27 euros (US$24.6) on an otherwise downbeat trading day on the Frankfurt Stock Exchange on Friday.
"We do not comment on market rumors," was Commerzbank's response to the speculation that the merger talks could soon produce a deal.
Commerzbank has been seen by analysts as a possible takeover target as pressures for rationalization of Germany's "over-banked" banking sector have grown.
This was particularly the case after the failure last year of merger talks between Commerzbank and Dresdner Bank AG, Germany's third biggest bank.
Adding to the pressure on Commerzbank has been the emergence on the bank's share register of a new major stakeholder, Cobra, which has an 18 percent holding in the bank and has demanded that Commerzbank seek out a new partner.
Dresdner went on to be taken over this year by Allianz AG, Europe's biggest insurer.
The Italian insurer, Assicurazioni Generali, which holds a 10 percent stake in Commerzbank, is also expected to help shape any deal with Unicredito, Italy's second biggest bank.
Coming as the eurozone prepares for the final stage of currency union with the launch of euro notes and coins on January 1 next year, a possible Commerzbank bank agreement with the two Italian financial houses would also be a major breakthrough in cross-border merger deals in Europe's financial industry.
Germany's Welt am Sonntag said the new merged bank would be headquartered in Brussels with Commerzbank chief Klaus-Peter Mueller taking over at the helm of the new combined group.
The German press claims that an announcement on the merger would be made by September 10, on the eve of Unicredito holding a board meeting to approve its latest results.
But the markets have also been busy speculating that a counter bid could emerge for Commerzbank in the coming days.
This, analysts say, could even include a bid from Deutsche Bank AG, Germany's biggest bank, which also failed last year to cut a merger deal with Dresdner.
Apart from the threat to their market shares of the giant German savings business, Deutsche Bank, (along with Allianz for that matter), would probably feel somewhat uncomfortable with other European financial houses helping to reshape their domestic market.
Last month Deutsche Bank chief Rolf Breuer indicated that his bank might be interested in linking up with Commerzbank, although he later withdrew the remarks.
While pressure for streamlining the German banking sector has been building up for years, it was Berlin's pension and tax reforms which paved the way for the latest moves for a shakeout in the industry.
Apart from sweeping changes to the pension system aimed at promoting private pensions, the government has decided to ax from the start of next year the capital gains tax on the industrial holdings, which German financial houses have built up since World War II.
The result has been a shift towards the creation of new big bank-assurance groups in Germany with the nation's second biggest bank, Hypovereinsbank AG strengthening its links with the insurance company Munich Re following Allianz's takeover of Dresdner.
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