Deutsche Bank dismisses merger reports as 'fictions'

By Tom Sims

FRANKFURT (Reuters) - Deutsche Bank has dismissed speculation that it might seek a merger as "fictions", after media reports suggested Germany's biggest lender might seek tie ups with Switzerland's UBS or German peer Commerzbank.

Speculation about a possible merger has increased as Deutsche Bank battles to recover from three years of losses.

German business daily Handelsblatt reported on Tuesday that Germany's biggest bank had studied the effects of a theoretical tie-up with UBS, citing unnamed sources.

The Handelsblatt report, the latest in the German financial press on the issue, said the UBS scenario and a potential merger with Commerzbank were discussed at Deutsche Bank's strategy meeting with the supervisory board this month.

Handelsblatt quoted an unnamed source as saying managers at the Deutsche Bank strategy meeting stressed that any immediate merger was "completely unrealistic."

Deutsche Bank Chief Financial Officer James von Moltke on Wednesday said recent merger reports were "fictions of the press", while UBS and Commerzbank declined to comment on Wednesday's Handelsblatt report.

"We are constantly amazed at what passes through the editorial filters and gets into the press," von Moltke said, adding that Deutsche Bank had a lot of work to do on the merger of its retail units, which would take several years.

Deutsche Bank's shares were down 0.9 percent midday, while UBS was down 0.8 percent. Commerzbank was up 0.3 percent.

Media reports on Deutsche Bank's potential next steps have picked up since it changed its management and announced a strategic overhaul that includes thousands of job cuts and scaling back its global investment bank.

On paper, a potential merger with UBS would fare better than a deal with Commerzbank as Deutsche Bank and the Swiss lender would complement each other well in the areas of investment banking and wealth management, the Handelsblatt report said.

A merger with Commerzbank, in contrast, might lead to high restructuring costs due to a large overlap, the paper said.

Handelsblatt quoted an unnamed source as saying managers at the Deutsche Bank strategy meeting stressed that any immediate merger was "completely unrealistic."

Asked at a conference on Wednesday about the potential for a tie-up with a competitor, Deutsche Bank's chief executive Christian Sewing said he had "said everything there is to say about it and I am working on my homework".

The comment echoed statements earlier this week when he dampened speculation of a possible merger in the near term, saying the bank must focus on its homework for the next 18 months.

However, the German government, which owns more than 15 percent of Commerzbank, has also stoked merger speculation.

Finance Minister Olaf Scholz has said the country needs strong banks to foster exports. Some bankers privately regard that as a shift in sentiment and hints at a willingness to back the financial industry, including helping engineer a merger.

Under the merger scenario with UBS, Deutsche would be the junior partner, and the German government would have to accept that, Handelsblatt reported.

(Reporting by Christoph Steitz and Tom Sims; Additional reporting by Michael Shields in Zurich and Matthias Inverardi in Duesseldorf; Editing by Louise Heavens/Edmund Blair/Alexander Smith)