Steven Arons and Dinesh Nair
Bloomberg January 28, 2019
(Bloomberg) — Deutsche Bank AG won a commitment for new investment from Qatar as the troubled German lender moves toward a potential merger with Commerzbank AG.
The investment is likely to be made through the Qatar Investment Authority, the country’s sovereign wealth fund, according to people familiar with the matter, who asked not to be identified because the talks are private. Two other Qatari investment vehicles, controlled by members of the royal family and other prominent politicians, already own a stake in Deutsche Bank.
Germany is backing a Deutsche Bank merger with Commerzbank to ensure the country has a strong domestic lender to help fund the country’s export-oriented economy even during a crisis. While it’s viewed by some as an imperfect solution that forces two weakened entities together, a combination may allow Qatar to recover part of its investment in Deutsche Bank after the stock last more than half its value last year. A big domestic bank may also appeal to Qatar because of its plans to boost investment in the German economy.
A Deutsche Bank spokesman declined to comment. Representatives for QIA didn’t respond to requests for comment.
Deutsche Bank rose as much as 2.3 percent and was trading 0.8 percent higher at 8.19 euros as of 10:56 a.m. in Frankfurt.
Talks between Deutsche Bank and the German government have intensified recently. Representatives of Germany’s largest bank had 23 discussions with officials since the new government was formed in March, most of them with Deputy Finance Minister Joerg Kukies. Chief Executive Officer Christian Sewing and supervisory board Chairman Paul Achleitner each had six exchanges, according to a Finance Ministry letter seen by Bloomberg.
The frequency of the talks, which included discussions of “strategic options,” highlights the close involvement of Berlin as Sewing tries to restore profitability to a bank battered by three straight years of losses, management turnover and the departure of key talent. Any deal would likely be dependent on upfront funding, while a merger with Commerzbank could entail extensive job cuts as the two banks set out to eradicate duplicate functions and branches.
Deutsche Bank, which has been trying to regain its footing after years of restructuring in the aftermaths of the global financial crisis, also faces strain on the regulatory front: there’s broadening U.S. scrutiny as a leading Republican lawmaker joined Democratic colleagues in questioning the lender’s steps to combat money-laundering amid reports that its U.S. unit may have been a key conduit for dirty cash.
QIA, which manages $320 billion, is known for its big-name investments and has purchased stakes in companies including Rosneft PJSC and Volkswagen AG. QIA Chairman Sheikh Mohammed bin Abdulrahman Al Thani suggested in an interview at the World Economic Forum in Davos that Deutsche Bank is among the major German companies the sovereign wealth fund is talking to about potential stake purchases.
QIA is looking “at different sectors” in Germany, said the chairman, who is also deputy prime minister and foreign minister of gas-rich Qatar. “Financial services is among them,” as are infrastructure and industrials, he said.
Many sovereign wealth funds have been “underweighting traditional financial stocks and moving into the fintech space, so this would be an interesting investment,” said Rachel Pether, an adviser at the Sovereign Wealth Fund Institute. “The financial services industry holds a strategic importance in the development of a country’s economy, and given the strategic importance of Deutsche Bank to the German economy, this is perhaps as much a political decision as a financial one.”
Last year, Qatar said its projected investment of 10 billion euros ($11 billion) in the German economy over the next five years would be its largest single investment in the country to date.
–With assistance from Mohammed Aly Sergie, Yoolim Lee and Archana Narayanan.
To contact the editors responsible for this story: Dale Crofts at [email protected], Paul Sillitoe
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