Deutsche Bank Seeking a “Guarantee of Existence” with Monster-Merger?

Opposition Is Growing to Merger Between Deutsche Bank and Commerzbank.

By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.

The chief executive of eternally troubled Too-Big-To-Fail Deutsche Bank, Christian Sewing, believes the time is ripe for a merger with its national rival, Commerzbank, combining Germany’s two biggest, most dangerous lenders. So, too does his counterpart at Commerzbank, as does US private equity firm Cerberus, which owns 3% of Deutsche Bank and 5% of Commerzbank.

Germany’s Finance Minister and card-carrying social democrat Olaf Scholz is also firmly on board. Indeed, many say that he’s the one leading the charge despite the tens of thousands of job losses a merger between the two banks is guaranteed to produce. Scholz’s deputy, Joerg Kukies, has courted controversy for his previous role as co-chief executive of Goldman Sachs AG, which is reportedly advising Commerzbank on the proposed $28 billion tie-up. But Kukies insists there are no conflicts of interest, which is a relief.

For some time now, the German government has been exploring ways to lever a merger between the top two banks to add scale and slash expenses. As things currently stand, Deutsche Bank shows little sign of halting, let alone reversing, the “vicious cycle of declining revenues, sticky expenses, lowered ratings and rising funding costs” that the group’s CFO James von Motke says has been plaguing it. Whether lumping it together with a bank that has already been bailed out once in “a merger of weakquals,” as London-based brokerage Olivetree calls it, will help right the ship is highly debatable.

But right now, the big concern is that time is fast running out for one of Europe’s biggest and most hyper-connected lenders. Unless something drastic is done soon, the next downturn could prove fatal for an already gravely weakened Deutsche Bank whose stock has been in a death-spiral since 2007, having lost over 90% of its value, and whose price-to-book ratio — the equation often used to reflect the value that market participants attach to a company’s equity — is currently below 25%.

Normally, when a company’s P/B ratio falls below 1, it means the market is either undervaluing it and thus it could be good value, or the company is in trouble. When the ratio slumps as low as 22%, as is the case with Deutsche Bank, it’s far more likely to be the latter than the former. Hence all the frantic merger talk.

But opposition to the deal is building. On Wednesday, the Financial Times reported that union bosses representing Deutsche Bank workers have threatened to scupper the integration of Postbank, which Deutsche Bank bought nearly a decade ago but still hasn’t fully ingested, if the merger talks continue. Worker representatives make up half the supervisory boards of both banks and have unanimously rejected the proposed tie-up.

It’s not just the banks’ workers who are worried about the merger. So, too, are Deutsche Bank’s all-important Qatari shareholders, who fear their already beaten-down holdings will get further diluted. The five economists of Germany’s highly regarded Council of Economic Experts, which advises the federal government on economic matters and is often referred to as “The Five Sages”, have also expressed deep reservations about the planned merger. At a recent press conference Isabel Schnabel warned of the risks the merger could pose to German taxpayers:

“After a merger of this kind, it is perfectly clear that a bank like this will never sink. I would clearly discourage the creation of an even bigger national champion… I think it’s a very bad idea in every way.”

The German state already holds a 15% stake in Commerzbank, as a result of bailing out the lender following its suicidal €9 billion acquisition of Dresdner Bank just before the last crisis. If the merger with Deutsche Bank went ahead, German taxpayers would hold around 5% of the newly formed frankenbank, which, as DW business editor Henrik Böhme warns, “could easily be construed as a guarantee of existence.”

And that is probably the main point of the merger: to open the door to ongoing, never-ending state support of the country’s two biggest financial institutions, while also ensuring that no rival European banking giant, such as BNP Paribas, gets its hands on the assets of Deutsche Bank, Germany’s one and only global systemically important bank.

But whatever the motives behind the plan, the five sages’ unanimous opposition to it could prove to be a major obstacle. “The two institutions would have to determine for themselves if a merger would make economic sense, but if this were to be organized with state aid, we would have to be very skeptical,” said Lars Feld.

Even senior members of the European Central Bank (ECB), which has long lobbied for greater concentration in Europe’s ailing banking sector, are expressing big doubts about the tie-up. “I don’t particularly like the idea of national champions or European champions,” said Andrea Enria, the new head of the ECB’s supervision board, adding that the job of a banking supervisor shouldn’t include promoting any particular structural outcome.

Whether the ECB agrees with Enria is not yet clear. Representatives of the bank, including Enria’s predecessor, Daniele Nouy, have repeatedly called for the creation of “European champions” to compete with their much larger US rivals. But there are no guarantees that a tie up of Deutsche Bank and Commerzbank will result in such an outcome, while the risks to German taxpayers and the wider financial system of creating an even bigger frankenbank could not be greater. By Don Quijones.

Shareholders wiped out, 14 Months after competitor Carillion Collapsed. Read…  Outsourcing Giant Interserve with 65,000 Employees Collapses

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  26 comments for “Deutsche Bank Seeking a “Guarantee of Existence” with Monster-Merger?

  1. HR01 says:


    Many thanks for the piece.

    DB should simply be taken out behind the barn and shot.

    BTW, does DB still carry the distinction of carrying the largest derivatives book on the planet?

  2. Dale says:

    Excellent article!

    “The poor performance of Deutsche Bank shares is often cited as evidence of a failing business model. But this raises a simple question: failing for whom? From the perspective of shareholders (or global capital, as it were), the failure is clear. But from the perspective of staff, the business is providing extremely high returns.”

    If Deutsche Bank has ever to act like a real bank and provide returns to its shareholders, which seems likely in order to convince a merger partner, then there will be a lot of unhappy high-paid help. On the other hand, maybe Commerzbank is similarly situated.

  3. Javert Chip says:

    To put a little more meat on the bone, a couple of the most common reasons for a poor Price/Book ratio is investors flat do not believe stories about loan quality and expense management.

    That goes in spades for crippled Deutsche Bank

  4. illumined says:

    So, two troubled institutions combining to make an even bigger troubled institution? Nothing could possibly go wrong with that…..

  5. Jack says:

    Thank You Don,

    Great article, we’d like more reporting on Europe please.

    in regards to this too big to fail BS that the world economy is carrying since the catastrophe of the banks bailout across the board from the US, EU, and the rest of the world.

    It will be interesting to see the amount of fervor and anger that the populations of these countries can demonstrate come the inevitable!

    It will be huge, institutional failures have to happen, and the economies have to be ( Re- Aligned) to SERVE the citizens of these countries NOT. the Elite!

    We can only hope, that jails will accommodate more

    1- Business leaders
    2- politicos

    Do we stand a chance?

    • MD says:

      As long as category 1 continues to offer highly lucrative, cushy jobs (e.g. ‘special advisor) to category 2….no.

      Corporate capture is complete, and the only – ONLY – thing that will change that is a return to genuine social democracy.

    • Bill from Australia says:


    • kevin says:

      Jack, short answer is NO to your question.
      Deutsche bankers and politicians will definitely get the German tax-payers to foot the bill via fiat and/or fraud.

      Long answer below:
      The people (defined generally as all the non-elites, patriotic tax-paying “good” Americans, middle-class Europeans, law-abiding Japanese folks or even the newly-minted capitalist Chinese citizenry) don’t stand a chance and never did stand a chance throughout history.

      Whether you are referring to the current Chinese peeps constricted under their social credit system of their dystopian techno-feudalism, or the hardworking conservative Germans during the Weimar republic makes little difference, it is always the “normal” folks who gets screwed by the powers-that-be (i.e. the politicians and their bankster chum friends)

      Most people still don’t get it because they do not realize Democracy is the aberration, NOT the norm over the long arc of human history.

      Democracy is a fragile and highly unstable structure, especially when you have a huge middle-class bulge in the middle.

      The middle-class itself is a relatively recent social invention, formed only in the last 200 years or so.

      Prior to that, it was always your Monarchs in England, your Aristocrats in France, your Rajahs in India, your Emperors in China, your Shoguns in feudal Japan, your Great Khans in Mongol, your Pharaohs in ancient Egypt etc.

      The peeps? They were all just canon fodder, tax-sheeps, slaves, farm-hands or the hordes of nameless nondescript cheap labor.

      Today in our supposedly modern democratic societies, where are the peeps.?
      They are the same class of patriotically-brainwashed cannon fodder, tax-sheeps, financial slaves, cubicle-hands or the hordes of nameless nondescript cheap labor. lol.

      The most stable hierarchies in the world is the pyramid structure (hence the Egyptian pyramids are still standing despite earthquakes and floods and thousands of years of erosion).

      Which is why the most stable social hierarchies are pyramids too.

      Which is why our economic system is also a huge Ponzi (aka pyramid), whereby each layer or each generation feeds off the next subsequent layer below it and so on and so forth.

      Like the Parisians yellow vests now, you may think fomenting revolt is the ultimate answer, but every revolution is just another cycle in the big picture.

      Once the peeps tire of the burning, sees too much blood on the streets or they run out of food, the peeps inevitably go back to being “law-abiding”, “tax-paying” “good” citizens. And the cycle repeats….until the next “revolution”, literally and figuratively.

      I would say, it is even harder to revolt in our present times staring down the barrel of a machine gun; than in the past, when the peeps were quite evenly matched wielding their pitchforks against the Duke’s henchmen with their broadswords.

      Today, one single 5.56mm GPMG with 3 spare barrels, mounted on an armored personnel carrier can easily mow down 10,000 demonstrators in a day, and the peeps will be helpless and running scared like little rabbits, like in Venezuela now.

      Except for a few countries like the US, Switzerland or Israel, the peeps have largely been disarmed and domesticated like so many neutered sheep; all for the sake of their own safety (according to the exhortations of their politicians).

      Even if by some miracle, the peeps succeed in their revolution and installs one of their own “revolutionary” leaders as their new head of state and then rejoice with hugs and fanfare and merriment for awhile, it will still be futile in the long-run.

      Given human nature, each “leader” the peeps elevate as their new representative will eventually become prideful, fall into the bankers charm of endless fiat printing and grow accustomed to the privileges at the top of the pyramid.

      Isn’t all revolutionary “leaders” from Lenin, to Mao to Ayatollah Khomeini all the same despots?

      Likewise with “representative” democracies. These are still pyramidal structures and are also deeply flawed because there is no bloody way one person can “represent” the interest of so many. The democratic vote is just a farce and a false choice even when there is no rigging involved.

      One may even argue that voting is actually an elaborate act of acquiescence and highly DIS-Empowering because, in exercising you choice to vote for a particular party or person, you have willingly given up your own unique identity to be “represented” by someone else, which is not you and can never truly “represent” you.

      Thus, the peeps too, consciously and unconsciously, are fooled into supporting this pyramidal structure.

      Doesn’t every person look up to and admire those at the top of the food chain?

      – Millennials love to have selfies with their Prime Ministers or the Queen, or hope to marry some Royalty too.

      – Baby Boomers feeds off on the next layer of peeps by renting out their investment properties, much like the Aristocrats of old.

      – Every other peep age group in between watch in awe and aspire to be like the global elites in the lifestyle of the Rich and Famous, or buys into false hopes of winning the next lottery.

      – Every other peep hopes to get into a banking or some financial career path to fast-track their own wealth. The peep that watches in disdain at at banksters and the financialized elites does not hesitate to grab an opportunity to work for them.

      In fact, I have personally known peeps who would openly disparage the “undeserved wealth” of the bankster elite class on the one hand, and then tell me how proud they are that their own child managed to clinch a high-paying banking job within the same breath.

      Hypocrisy knows no bounds. lol.

      The peeps will not give up on the pyramid scam. They can’t and they won’t. That is why the peeps stand no chance at all.

      They have very little chance against modern assault weapons, and then even if they win the physical struggle, they cannot overcome human nature.

      The structure is a big part of the problem but like all good riddles, you can’t live without the structure even when you know its the problem.
      Love it or hate it, the peeps are stuck with it, unless human ingenuity can find a better alternative social structure.

      All pyramid structures has to have a tiny top, supported by the huge masses below it. An ant colony has to have a singular Queen with many disposable worker ants. It is almost like Nature has cursed the peeps class to eternal damnation no matter what they do.

      This is the probably why the global elite of 0.01% are so flagrantly bold and unrepentant and will continue to treat the peeps as but dirt on their feet. They know you have no viable alternative, and you are just as enamored of the pyramidal web of lies as they are.

      As long as the peeps become a part of the current pyramid scheme, either by default, by design of someone else, or by their own desire; the peeps have already lost the battle and lost their moral compass.

  6. Realist says:

    Once more an excellent piece by DQ.

    A silver lining for DB is to be found in Sweden and Denmark. Swedish bank Swedbank together with Danske Bank seem to be strong contenders for first place as the dirtiest bank around, until now DB has almost always been involved when something shady has surfaced…

    • fajensen says:

      Danske Bank is very well connected within Danish business, the Danish central administration and of course the pension funds.

      It has, according to memory, been not exactly bailed out, but Helped Out on at least four occasions where it managed to get itself into hot water. If there is something going down, Danske Bank can be found on the wrong side of whatever it is.

      They are quite smug about the whole thing, we only get the usual spin-gobble from them, there are no confessions of anything or specious promises to “do better”, no mass ejections of managers claimed to be responsible and so on. Meaning they are still hiding something and they expect that someone has their back for them like all the last times they screwed up.

      This time it’s a little bit different because we now have a belligerent US-regime intent on bossing everyone around on stuff like Nordstream 2, Huawei, Iran and God knows what else next week. Danske Bank have been laundering money for the “Evil Russians” while doing business in the US. They can, in principle, lose their license to clear USD transactions.

      Unless … something is sacrificed to The Gulfs;

      Very suspiciously Huawei has been ejected from Denmark’s 5G contracts, the government just made a law that allows the Danish “Centre for Cybersecurity” to forcibly instrument all businesses with network monitoring equipment and the government is making noises about how bad Nordstream 2 is (but they are impotent to stop it, legally*). It is now illegal to criticise NATO … bet they got that idea from China or Russia.

      So, probably Danske Bank will still clear USD. The question is what the fine will be and they are being sued of course by losers being their stock.

      Stock hasn’t gone through 120 DKK a share yet. If it does, I think it will drop a lot more. Then the confessions and write-offs will finally come, and then the “help-out” making the stock a safe buy for years. On the other hand, maybe one should make a small pilot-buy now, to test the waters. It will probably bounce off 120 DKK again, however, Danske is bound to be positioned on the wrong side of Brexit, to stick to it’s form.
      Decisions, decisions ….


      The VD from Swedbank just got sacked and it seems there is also insider trading and fraud involved:

      Politically, interference in NS2 is a bad idea because pissing of your next-door neighbour to curry fleeting favour with crazy Uncle Sap living out in a swamp somewhere is maybe not so good an idea even though it’s a bit scary that Uncle Sap has all these swampy biker friends camping around at his shack.

  7. Bankers says:

    I don’t think people outside of Europe can fully understand how difficult it is to cover stories like the above. In most countries we are used to a form of national accounting which remains within a relatively closed circuit – national : currency , government, central bank, law and so on.

    In Europe there are added layers of opacity, the ECB is not accountable to any one government, there is confusion over the priority of national law vs. what EU commitments stand for in practice, any national decision on banking is referred to a European context and achieving competition with neighbouring countries as well as on leverage available with the ECB , regulatory bodies work hidden behind the scenes without direct open interaction with national politics, and so on.

    So when I read these stories, and they are much appreciated, I also always have a sense that the deeper story is hidden out of sight in the labyrinths of power that now exist as EU, and like all other people I know, I do not know either exactly what those stand for. The objectives are so broad, the implementations so variable between being hyper specific and non existant, that the uncertainty generated is no longer covered by directing the focus to an “as if national event but with EU oversight”, instead of maybe the assumption of responsibility of a circumstance that is fully wound into the deeper management of Europe. The latter cannot be presented though because the mandate to that level of authority simply does not exist and would openly clash with people’s understanding of their own national sovereignty.

    So the larger movement continues in the shadow and using whatever platforms that exist and are convenient to create an official direction that is presentable to dozens of countries and hundreds of millions of people with very diverse views. That means that any depth of transparency is lacking, something which when only at a national scale is partly forgiven for being a priority of close endeavour whipped into shape by some kind of trust armed with local accountability to oversight, but when at a pan-national scale is beyond the full understanding and reach of most people. That would not matter either except the national responsibility is sold into and partnered with the dealings of the larger power, their authority becoming corrupt and subservient in the twilight of opportunity that is offered them for their quiet cooperation.

    It is this kind of moribund state that is being auctioned if not fobbed onto the people of Europe, and I do not think they really know what to make of it, either grasping at whatever pretense is offered or watching dumbfounded as the world around them changes form and meaning.

    • Ed says:

      Yes, the E.U. is complicated.

      And yet I agree with “Laughing Eagle” that old national politics — i.e. Germany defending it’s big bank from French or Spanish takeover — explains this merger idea best.

      Plus ca change, plus c’est la meme chose.

      • Ed says:

        Sorry, “its big bank” . . . though sometimes the government does act like it and the banks are one and the same, witness the ex-bankers in government in the U.S. in 2008.

        • Bankers says:

          Freud would be proud. From what I have seen in Europe often it is the other way round to bankers in government, Macron (and the UK home secretary as well I think) being obvious exception, but there is also a bit of cross over from US banking experience. In Spain there were many bank positions occupied by politicians. I don’t know enough to do more than add the above anecdotes and should really try to find out if anyone has studied this.

          The overall impression though is that politicians and banking are segregated from each other, the knowledge however is that there is deep cooperation and influence going on.

          Laughing Eagle may well be right, the Spanish guard their own banking quite jealously as well as being adventurous abroad ( e.g. south America, Turkey, UK, US also I think to a degree) , and the French tend to be very financially involved in other countries.

          What I find surprising is that for a country that has economically championed Europe that its main bank should be in so much difficulty – if any bank had the influence, backing and local stability for it to succeed it should be DB? I guess they got carried away at some point.

    • Unfashionable bourgeoisie says:

      The story is hidden to those who look with their eyes and stomach, but there are a growing number who via global travel or an MBA or stocks & shares casino players or via Q / Karen Hudes understand with their hearts the nature of the ‘larger movement’ – an ‘official direction’ is but a wave in the ocean struggling to raise up under the duress of the multiple directional waves surrounding it. With egotisticals such as Uri bendy spoon, there are those who can enact a large wave to overcome an idea – lessened impact in his case by his novice approach. Many country leaders consult astrologers although they would not have you know it – I have this on first hand authority. Those who manipulate know when a storm is coming, and set a buoy in place, so others jiggle in the water as they themselves are stilled – this is their only advantage. We are all bound by the same planetary/galactic laws. The more a story is hidden, the more it sparkles look at me. They understand that. It is why they make movies, to play out their desires and fears in public, placing programming in the minds of the many to enable outcomes. Millenials however may surprise this aged old approach, they use their hearts and may turn it on its head! Getting a film heard these days is a challenge, narratives dissipitate in the ether far more quickly. Deutsche is part of the dying era of free money / quantitative easy / derivative shorts longs and baggy stockings. As Andrew Carnegie is quoted as saying ” the older I get the less I listen to what people say and the more I look at what they do”. The generally accepted Gold Reserves list is not accurate IMO. Some countries prefer to progress out of the glare. Whose activity is quietly confident ….

      • Cynic says:

        Quite true: one of my cousins in Spain provides Tarot services to business leaders and politicians.

  8. Unamused says:

    If your goal is to crash the economy so hard it enables the emergence of a ruthless authoritarian then merging DB with Commerzbank makes as much sense as appointing Stephen Moore to the Fed. Either nobody wants to talk about it or nobody else read the playbook.

  9. Laughing Eagle says:

    “main point of the merger: to open the door to ongoing, never-ending state support of the country’s two biggest financial institutions, while also ensuring that no rival European banking giant, such as BNP Paribas, gets its hands on the assets of Deutsche Bank, Germany’s one and only global systemically important bank.”
    That explains it all to me, especially the no European rival gains access to Deutsche.

    • Caradoc says:


    • Mike says:

      Amen. As a former IMF economist (Simon Johnson, whose books i highly recommend) once said banks captured the US government. i opine the same about the EU.

  10. upwising says:

    LAWS OF MATH TO CONSIDER in this “shotgun hook-up”:

    • Any quantity multiplied by ZERO equals ZERO.

    • Negative times negative times negative equals negative.

  11. Despite the Feds continued efforts, stress tests, reserve requirements, the US banking industry has never recovered from 2008. The Fed holds DB to different standards in its US operations. They also arranged some US majors, like Citi, to buy DBs derivatives a few years ago, which caused them to briefly fail their stress tests, but international banking is just a money laundering scheme, if you buy an unregistered derivative it is made whole again in the transfer. There is no point in trying to separate our banking system from theirs, and ours is in bad shape. Eventually all the majors on the planet will be zombie banks, and while making them too big to fail increases investor confidence, it erodes shareholder value, so while US banks are in great shape, compared to DB, they aren’t worth squat either.

  12. Cyclops says:

    Mergers of big banks is a bad economic decision! It means thousands of job cuts for duplication of functions. CEOs are always looking at increasing profits for shareholders!

    A few major banks means “too big to fail” at greater risks to central banks. It sounds logically easy to merge and sweep their problems under the rug! Deutsch Bank is the biggest holder of interest rate derivatives measured in hundreds of trillion of dollars! Basically derivatives should be banned and is by far the biggest threat to world’s financial system that central banks are powerless to prevent!

  13. Leser says:

    Thanks DQ for this article and your excellent coverage on the European banking sector.

    The Council of Economic Experts (“5 Sages”) mentioned is one of the few institutions which still enjoy near universal respect and trust in the country. Them coming out strongly opposing this plan is a statement that will be noticed. All the more since this is not a topic within their usual remit; a large merger would rather be a subject for the national export body on cartel questions, the ‘Monopoly Commission’.

    And DB a “National Champion” worth preserving? At at this point it should be clear to the Germans that this business is neither particularly national nor a champion. The only national aspect will be the audience who’ll pay for the coming bail-outs.

  14. Mike says:

    DB is doing what US banks did with the assistance of their cronies in the “FEDERAL” reserve. Look around. The smaller banks that were not bankster controlled were taken over or forced out of business.

    They could not compete with the banksters’ criminal banks that violate laws with impunity, are protected from prosecutors, and get free money from the “FEDERAL” reserve.

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