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Report: ECB, BaFin favor Deutsche Bank merger with European peer

The European Central Bank and German financial regulatory authority BaFin are inclined toward Deutsche Bank AG merging with a European peer instead of making an all-German deal with local rival Commerzbank AG, people familiar with the matter told Bloomberg News.

The ECB is understood to prefer a cross-border merger to drive integration in Germany's financial markets, while a BaFin analysis performed on a potential combination of Deutsche Bank and Commerzbank suggested the deal will not sufficiently benefit either institution, according to the sources. BaFin would prefer both lenders improve their profitability before going ahead with a possible merger, the sources added.

Both regulators' inclinations are in line with the stance of Deutsche Bank CEO Christian Sewing, who is devising a turnaround plan for the embattled lender.

A deal with a non-German European company would not sit well with some German government officials interested in a large banking entity, Bloomberg said.

In September 2018, Deutsche Bank executives said a merger with Switzerland's UBS Group was the most favorable option among possible European partners, though they contended that the timing was not right due to the German bank's weak share price, the sources told Bloomberg.