Qatar resists bank merger

Deutsche Bank is facing resistance from top Qatari shareholders to its planned merger with Commerzbank. The investors are concerned that a deal would dilute their holdings, if Deutsche Bank is forced to raise equity in a share sale to help fund the deal, sources said. The Persian Gulf nation is also seeking to negotiate other concessions, before it backs the deal, they said.

Deutsche Bank shares have slumped by about two thirds since Qatar first invested, five years ago. The discontent among key shareholders adds to widening opposition to the deal, which Germany sees as a way to ensure financing to the country’s export-oriented economy during a downturn.

Labour representatives on Deutsche Bank’s supervisory board say a merger would fail to strengthen the bank, while prompting massive job cuts. German newspaper editorials have also blasted the finance ministry’s role in orchestrating a deal between two weakened lenders.

Not everyone is against the deal. Private-equity firm Cerberus Capital, which owns significant stakes in both Deutsche Bank and Commerzbank, favours it. The German government also does.

Asset management firm BlackRock, which likewise owns stock in both lenders, indicated it may be sceptical of a deal. “What problem are we trying to solve here?” the firm’s vice chairman, Philipp Hildebrand, said last week. “That part is yet missing from this discussion.”

Qatar is understood to be interested in pushing for more bilateral deals with Germany in other industries, as a condition of backing the merger.

Qatari entities own more than 6% of Deutsche Bank. Any merger would have practical obstacles to overcome. Cost cuts — and where to make them — as well as balance sheet risks are set to take a central role in the merger discussions. Commerzbank has large holdings of Italian bonds, which may need to be revalued. Deutsche Bank’s US political exposure, and the future of its trading unit, will be tough issues, too.

Deutsche Bank is in talks with the ECB about the potential tie-up. Regulators remain sceptical of the deal and want to see a viable and profitable business model, before they approve of it.

Deutsche Bank has already raised $34bn in the past nine years, from investors, to fund multiple restructurings and may need a further €8bn for a merger with Commerzbank, according to Christian Koch, a DZ Bank analyst.

Bloomberg