Deutsche Bank CEO Christian Sewing. Picture: REUTERS/RALPH ORLOWSKI
Deutsche Bank CEO Christian Sewing. Picture: REUTERS/RALPH ORLOWSKI

Frankfurt — Deutsche Bank CEO Christian Sewing has told the lender’s supervisory board he is not focused on mergers at the moment and is instead concentrating on the bank’s overhaul until 2022, people with knowledge of the matter said.

Sewing made the statement at an annual supervisory board meeting held to discuss strategy. It comes amid a growing sense of urgency in Europe about the need for banks to scale up as the coronavirus crisis deals a further blow to the industry after a decade of weak returns.

Sewing has spoken before about wanting Deutsche to be an active player in European banking consolidation but he told the meeting, held in recent days, that for now he wants to focus on improving its profitability.

The topic of mergers is currently not at the top of the bank’s agenda, the people said. They declined to be named because they were not authorised to speak to the media about private deliberations.

Deutsche Bank declined to comment.

The bank is finally making progress on a major restructuring, closing and shrinking some business lines while shedding 18,000 staff in an effort to regain profitability after years of losses. Sewing wants to focus on that strategy until 2022, the people said.

Last year, Deutsche Bank called off merger talks with domestic rival Commerzbank. It also briefly explored a tie-up with Swiss lender UBS.

Other banks are also casting around for possible deals to bulk up balance sheets and cut costs. UBS has looked at how it could absorb smaller rival Credit Suisse and in Spain, which has been badly hit by the pandemic, CaixaBank is buying Bankia for €4.3bn and Sabadell has also held informal talks about a possible tie-up. For Deutsche, it is important that the bank play an active role in the merger process, rather than sit on the sidelines and get swallowed up.

Last week, Deutsche Bank’s CFO underscored the logic behind big bank mergers.

“We’ve been very focused on executing on our own strategy, and we think that strategy would prepare us to engage in merger activity when the time comes and the right opportunities arise,” James von Moltke said.

The pandemic has put banks under additional pressure by keeping interest rates low and forcing them to set aside billions of euros to cover expected losses from soured loans.

“The concentration of European banking business is on the way,” said Klaus Nieding of the shareholder lobby group DSW. “Covid-19 will even speed up this process. Due to that, 2021 will be a very interesting year on this front.”

Reuters

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