Embattled German banking giant Deutsche Bank (DB 8.67, -0.13, -1.48%) has been in the news as of late, as the stock remains trapped in a
multi-year downtrend amid the company's struggles to improve operations.
Deutsche Bank is considered a Global Systemically Important Bank, and it is
known to have one of the largest derivatives books among its peers.
Over the past couple of weeks, speculation regarding a potential merger with Commerzbank was resuscitated. However, the rumors of a tie-up between the two large banks were not new. On December 7, Bloomberg revisited the recurring story. Citing Focus Magazine, Bloomberg reported that Germany's Finance Ministry has shown willingness to facilitate a merger between Deutsche Bank and Commerzbank in a way that would make the German state Deutsche Bank's largest shareholder for roughly five years.
Bloomberg reported on a couple of other potential ways of structuring the deal, including the creation of a holding company that would own stakes in both banks. Another option would call for Deutsche Bank to raise money to purchase Commerzbank.
Shares of Deutsche Bank fell to a fresh record low last week, but the stock bounced swiftly after Handelsblatt published an interview in which CEO of Qatar Financial Center Yousef Mohammed Al-Jaida said, "We will invest in a large financial institution in Germany," adding that an announcement will be made shortly.
Mr. Al-Jaida did not refer to Deutsche Bank by name, but Qatar already has a stake in Deutsche Bank, suggesting that the gulf nation is preparing to increase its investment.
An investment from Qatar would not be a cure-all for Deutsche Bank, but it would grant the bank more time to improve its operations. However, skeptics will point to recent history, observing that the bank has not been able to implement a successful turnaround strategy even though monetary conditions in Europe have now been very loose for a few years.
Shares of Deutsche Bank have surrendered more than 54% so far in 2018, making a fresh record low in the process.
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