The on-off marriage of the decade is on again, possibly. Bloomberg reports that Deutsche Bank's discredited chairman Paul Achleitner has spoken to DB's shareholders and 'key government officials' about merging with Commerzbank. Nothing is confirmed, nothing is imminent, but the nuptials are becoming slightly more tangible. In the meantime, key Commerzbank traders are leaving.
The latest to escape is Brian Jensen, the London head of European corporate credit flow trading, who joined Commerzbank from Mizuho in 2015. Jensen, who made several hires after his arrival, is understood to have resigned last Friday. Insiders say he's off to Toronto Dominion in London, where he will be building out the credit trading franchise under Mike Murphy, the Canadian bank's European head of credit trading.
Following Jensen's exit, Michael Reeb is understood to be the new head of credit flow trading at Commerz in London. Reeb joined only three months ago, having previously worked for Landesbank Baden-Württemberg.
In the event of an eventual merger with DB, Commerz insiders suggest the bank's fixed income trading business is likely to be particularly vulnerable to cuts. However, the flow credit business at Commerzbank is small: there are just four financial traders in Frankfurt, four emerging market traders (two in London and two in New York) and one lone corporate bond trader left in London.
Commerzbank began moving jobs to Frankfurt well before the word 'Brexit' was a thing. The German bank announced it was relocating 340 London jobs to Frankfurt in 2015, of which around 80 were said at the time to be FX and bond traders. Commerz insiders told us then that structured product professionals were mostly left in London, while flow traders were being exported to Germany. Jensen's subsequent arrival suggests things didn't entirely go to plan; headhunters said some London traders who moved to Frankfurt subsequently left the bank due to frustration with the comparatively pedestrian set-up in the German financial centre.
Jensen isn't the only London trader to have left Commerzbank. Arran Rowell, Commerzbank's global head of London credit trading, quit in November 2016 and became head of credit strategy at BGC Partners. Around the same time, two of Commerzbank's top emerging market traders - Benjamin Cuddeford and Alejandro Bonano - left for BNP Paribas and Nomura respectively.
"The best people all left," says one London credit headhunter. "What remains at Commerzbank is just a very small outfit in terms of credit trading."
Beyond credit trading, Commerz staff are more sanguine about their future. Many of the German bank's structured equities salespeople and traders are already embroiled in merger talks with SocGen. The French bank made an offer for Commerz's EMC unit (exchange traded funds (ETF) portfolio, equity derivatives and other market making businesses) in March 2018. "We're more interested in the outcome of these talks than anything with Deutsche," says one Commerz equities professional. "Everyone is talking about the Deutsche Bank merger though," he adds. "It makes sense and we're all wondering when it will happen."
Commerzbank's Frankfurt investment bankers are enthused about a potential DB merger. "It would make a lot of sense," says one senior debt capital markets banker. "Germany must work on rebuilding a national banking champion that can compete against the best European and U.S. banks in all sectors.
"While Deutsche Bank has neglected its domestic market for years to prioritize its global ambitions, Commerzbank can restore its strength in Germany," he adds. Under new CEO Martin Zielke, Commerzbank began expanding ts German business beyond its traditional strength in the Mittelstand towards larger German corporates in 2016. Martin Reuther, head of Commerzbank's corporates and markets unit, and the man who has spearheaded the change, could yet emerge as a senior figure in any DB-Commerz merger.
In the meantime, London headhunters, say Commerzbank's leveraged finance team is one of the more impressive jewels in its crown. "They're an excellent mid-market leveraged finance platform," says one London headhunter, adding that Commerzbank has around 40 leveraged finance bankers in London and around 100 more in Germany. Even so, Deutsche Bank's business is by far the larger of the two: DB ranked second for all EMEA syndicated loans in the first quarter of 2018 according to Bloomberg, with a market share of 7%; Commerzbank came in13th with a market share of 3%.
Some observers are less certain about the wisdom of a merger of Germany's finest. “It’s like tying two drunks together to give them more stability,” Roy Smith, emeritus professor of management practice at New York University’s Stern School of Business, told Bloomberg.
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