German banking giant, Deutsche Bank, has been circling the drain for some time. (Read here and here). Now, Germany is planning to back a merger between Deutsche Bank and its smaller rival Commerzbank (which is also hurting) if the two can’t fix their businesses. The Wall Street Journal‘s Jenny Strasburg reports:
Deutsche Bank AG posted a steeper-than-expected fourth-quarter loss and vowed to cut costs more aggressively as the embattled bank struggles to quell persistent speculation about its future.
Friday’s results showed continued revenue declines and other signs of vulnerability, disappointing investors even as the bank generated its first full-year profit since 2014.
Shares in the lender were down 3.8% in afternoon trading.
The German government is prepared to back a potential merger of Deutsche Bank and smaller rival Commerzbank AG if both banks fail to gain traction in their prolonged turnaround efforts, The Wall Street Journal reported Thursday, citing government officials and people close to the banks. Executives of both banks have said they are focused on their separate strategies.
Chief Executive Christian Sewing on Friday sought to defuse the merger speculation without directly addressing any discussions, instead highlighting existing goals. “We have our plan, and we are working very, very hard on realizing this plan,” he told analysts on an earnings call. “On everything else, we do not speculate.”
Mr. Sewing called the merger topic the “repetitive question” in a press conference, answering that the bank should get credit for meeting its targets regarding costs and other measures in 2018.
The fourth-quarter loss—hurt by a steep decline in fixed-income trading—was smaller than a year earlier but steeper than expected by analysts, who cited a tough trading environment and Deutsche Bank’s own strategic challenges. The full-year €341 million ($392 million) profit was short of the roughly €420 million average expectation of analysts, whose forecasts were compiled by the bank. It followed a net loss of €735 million in 2017.
Read more here.