Fierce resistance from corporate clients dealt a key blow to Deutsche Bank AG’s deal talks with Commerzbank AG, according to people familiar with the matter.
Many Deutsche Bank customers threatened to cut ties with Germany’s largest bank should the deal go through, said the people, asking not to be named because the details haven’t been publicly disclosed. Clients who had business with both banks were worried about going from two credit providers to one, a senior Deutsche Bank executive said.
Chief Executive Officer Christian Sewing knew early on that many of his most important clients didn’t like the idea of its takeover of Commerzbank, according to the people. Some board members of large German corporations even told him so at Davos, when speculation about the deal started heating up. Still, the backlash that ensued after formal talks were announced in mid-March was intense, the people said.
In the end, the figures just didn’t stack up. The expected revenue loss “would have compounded the chronic difficulties of Deutsche to grow its revenue base,” Filippo Alloatti, a senior credit analyst with Hermes Investment Management, wrote in a note last week. For the deal, that may have been “the straw that broke the camel’s back,” he wrote.
Much of Germany’s Mittelstand—the backbone of Europe’s largest economy—still hadn’t forgotten their experience during the last financial crisis, when international and domestic lenders pulled the plug on lines of credit. With the German economy slowing down and worries about Brexit and a potential trade war, the privately held midsized companies weren’t keen on having all their eggs in one basket with a larger German bank.
—Bloomberg
