Bulletin: Commerzbank And Deutsche Bank Potential Merger Holds Promise Of Increased Efficiencies But Also Risks

FRANKFURT (S&P Global Ratings) March 18, 2019--A potential merger between Germany's Commerzbank AG (A-/Negative/A-2) and Deutsche Bank AG (BBB+/Stable/A-2) could, in time, offer considerable efficiency gains but also entails significant uncertainties and risks, according to S&P Global Ratings. If the merger discussions, announced by the banks yesterday following mounting media speculation, result in an agreed transaction, we will analyze the terms of the deal and assess the potential rating implications for both banks. In our view, the possible merger reflects the substantial structural and cyclical challenges facing Commerzbank and Deutsche Bank as they seek to improve their earnings and growth prospects while the European economies slow down and cyclical credit costs normalize from very low levels in the past. Germany's

...FRANKFURT (S&P Global Ratings) March 18, 2019--A potential merger between Germany's Commerzbank AG (A-/Negative/A-2) and Deutsche Bank AG (###+/Stable/A-2) could, in time, offer considerable efficiency gains but also entails significant uncertainties and risks, according to S&P Global Ratings. If the merger discussions, announced by the banks yesterday following mounting media speculation, result in an agreed transaction, we will analyze the terms of the deal and assess the potential rating implications for both banks. In our view, the possible merger reflects the substantial structural and cyclical challenges facing Commerzbank and Deutsche Bank as they seek to improve their earnings and growth prospects while the European economies slow down and cyclical credit costs normalize from very low levels in the past. Germany's structurally lower margin, high cost retail and commercial banking market, and an unsupportive eurozone interest rate environment are squeezing returns at the banks. Deutsche...

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