Germany's two top banks launch merger talks to create national 'champion'

Germany's two biggest lenders, the ailing Deutsche Bank and Commerzbank, said Sunday they would launch formal talks toward a possible merger that could create a "national champion" in financial services.

Chancellor Angel Merkel's government has been urging the two Frankfurt firms to explore a cross-town tie-up to avoid either one being swallowed up by a foreign competitor and to create a muscular player that can finance Germany's export-driven companies.

The lenders, both grappling with painful restructurings after years of falling profits, have long been the subject of merger rumours.

Deutsche Bank said Sunday it was "reviewing strategic options and confirms discussions with Commerzbank", adding that "there is no certainty that any transaction will occur".

Commerzbank said both banks had "agreed today to start discussions with an open outcome on a potential merger".

If they did tie the knot, they would create a European banking behemoth with some 1.8 trillion euros (USD 2 trillion) in assets, close to France's largest bank BNP Paribas.

Deutsche Bank's market capitalisation is 16.1 billion euros while Commerzbank's is 8.9 billion euros.

Deutsche Bank's CEO Christian Sewing said in a letter to staff that "we have to assess opportunities as they arise" and that "consolidation in the German and European banking sector is an important topic for us".

"Our stated aim remains to be a global bank with a strong capital markets business -- based on a leading position in our home market in Germany and in Europe, and with a global network."