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Deutsche Confirms Merger Talks, DWS Spikes Allianz's Interest

Zacks Equity Research

Deutsche Bank AG DB confirmed the rumors of being involved in merger discussions with Commerzbank AG. The company assured investors that management will undertake a close review of proposals that will be presented to the bank.

Per a Bloomberg article, the combined entity will become Europe’s fourth-largest lender with assets of about €1.81 trillion ($2.05 trillion). However, the companies stated that the discussions might not be fruitful, on account of “potential economic and technical factors” that might act as hurdles.

In 2016, the parties had begun discussions for a partnership, wherein Commerzbank was to be merged with a subsidiary of Deutsche Bank. However, the talks turned out to be unsuccessful. Notably, political pressure for undertaking merger of Commerzbank to avoid a potential foreign takeover, has likely accelerated the progress.

Recently, Bloomberg reported that Allianz SE, a German insurer, has shown interest in combining its asset management unit with Deutsche Bank’s DWS Group. Allianz is currently considering the suitability of the deal before making things formal.

In early 2018, Deutsche Bank had revamped the asset management wing with a new name and logo to raise about $2.2 billion as additional funds through the IPO.

If the bank is able to strike a favorable deal, the resulting funds can be used to finance the Commerzbank merger. The combined asset management arm will be “a national champion in active money management”.

These restructuring moves might be a last resort for Deutsche Bank to check stock price from falling further and improve financial performance. Also, the bank’s impressive cost-saving strategy is expected to lend support.

Shares of the company has lost 25.6% in the past six months as against slight growth of the industry it belongs to.

Deutsche Bank currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Itau Unibanco Holding S.A. ITUB has been witnessing upward estimate revisions in the past 60 days. Also, the company’s shares have gained nearly 36.7% on the NYSE in the past six months. It carries a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Banco Bradesco SA BBD has been witnessing upward estimate revisions in the past 60 days. Additionally, the stock has surged around 70.6% on the NYSE in the past six months. Currently, the stock sports a Zacks Rank of 1.

Grupo Financiero Galicia S.A. GGAL carries a Zacks Rank #2. The company has been witnessing upward estimate revisions for the current year in the past 60 days. The stock has improved 13.3% in the past six months.

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