Commerzbank chief Zielke lobbies for merger deal amid mounting opposition

Bloomberg

Commerzbank AG Chief Executive Officer Martin Zielke, almost three weeks into formal discussions about a combination with Deutsche Bank AG, is lobbying hard to overcome internal opposition to the idea.
The lender doesn’t have the market share needed for costly investments to pay off, Zielke told employees in a memo. Low interest rates are squeezing profits, regulatory expenses have increased and clients are demanding quick and digital banking solutions, he said. While Commerzbank’s strategy of aggressive client acquisitions was working, a deal could be a faster way to add scale.
“What you should take away with you: the alternative of doing nothing is not an option,” Zielke wrote. “We will take further steps in order to increase our growth and our profitability. At the end the question will be whether a potential tie-up makes strategic and economic sense and how such a model could look like.”
As Commerzbank is nearing a decision whether to intensify the talks or break them off, Zielke has been pushing for a quick result, a person briefed on the matter said. The CEO is under pressure after abandoning most of his mid-term targets and slashing bonuses. Should talks with Deutsche Bank fail, other bidders may already circling. A Commerzbank spokesman declined to comment on the memo.
The memo is at least the second Zielke sent to staff since formal talks with Deutsche Bank began. Even before, the CEO faced criticism internally after slashing bonuses by more than 40 percent in February, on the same day that he announced the “successful” completion of the first half of his turnaround plan. Zielke acknowledged the company “didn’t do a good job” communicating the cuts.
The discussions with Deutsche Bank, which would likely acquire Commerzbank if a deal is struck, have compounded the discontent. Many employees have expressed their discomfort with the idea, he said in the earlier memo. Labour representatives, who have half the seats on the supervisory board, criticised the move and unions called on staff to use warning strikes scheduled as part of wage negotiations to protest against the tie-up.
Deutsche Bank and Commerzbank are leaning towards proceeding with the discussions and are close to a consensus on the rough outlines of a potential deal, people briefed on the discussions said. The two banks have been in daily contact since formal talks started last month.
“Organic growth has one disadvantage: you need time to substantially increase your market share,” Zielke said.