U.S. Markets open in 4 hrs 49 mins

Bank regulators deem any Deutsche-Commerzbank merger unwise - source

FRANKFURT (Reuters) - European bank regulators do not think Germany's two largest banks, Deutsche (DBKGn.DE) and Commerzbank (CBKG.DE), should merge, a source with direct knowledge of the matter said.

Commerzbank is too small to make a difference for Deutsche Bank, and both need to focus on increasing profitability and stabilizing their businesses, the source told Reuters.

"It doesn't make sense now," the source said, following months of speculation that Berlin might engineer a merger between the two banks to support German exporters.

Deutsche Bank and Commerzbank, which are regulated by the European Central Bank (ECB) and German financial markets watchdog BaFin, declined to comment on the situation.

BaFin was not immediately available for comment.

Shares in both banks spiked on Wednesday after a Bloomberg report said bank regulators would prefer Deutsche to merge with a European rival rather than Commerzbank.

Citing people familiar with the matter, the report said the European Central Bank (ECB) favours a cross-border combination to drive integration in the region's financial markets.

Shares in Deutsche Bank, which hit their lowest level on record last month, closed up 8.4 percent, outperforming the broader banking sector, while Commerzbank rose 7.4 percent.


(Reporting by Tom Sims in Frankfurt and Danilo Masoni in Milan; Editing by Kathrin Jones and Alexander Smith)