I am wondering to what extend this deal could make sense. What I thought about was the following
- Cutting down non-interest expenses (especially labor)
- Cross selling of products. Only in investment banking?
- Maintaining a "national champion" in Germany. Almost EU 2tn in assets
- Make the combined bank competitive again in a "overbanked" landscape
- New "chance" to reinvent itself (not really an argument)
Risks and drawbacks
- Massive opposition by labor unions (merger would lead to reduction in personnel)
- Integration costs (EU 4bn according to FT)
- FV adjustment of sovereign debt of CoBa leading to one-time losses of EU 4bn
- DB's exposure to level 3 assets (illiquid derivatives)
- Opposition of some shareholders and likely dilution of CoBa share price (creation of badwill)
- Increased capital requirements only due to increased size (T1 capital)
- Questionable legal structure. Heard of plan to create a holding (1) DB investment banking (2) Retail and corp banking of DB + CoBa
- A combined bank would lose clients due to bank diversification of the clients (mandatory?)
- A merger would be the complete opposite of the downsizing strategy proposed by DB's new management
Btw: Commerzbank hired GS and Rothschild, DB hired an ex-Centerview FIG-banker and works with Citi according to the Financial Times.
Is this all just happening for political reasons and pressure from Cerberus? Here, I see many risks and very limited return potential (especially for shareholders).
Does anyone of you have any insights why this is happening (maybe also some FIG bankers)?