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Report: Deutsche Bank, UBS explored i-bank merger options in June

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Report: Deutsche Bank, UBS explored i-bank merger options in June

Germany's Deutsche Bank AG and Switzerland's UBS Group AG entered into short-lived discussions in mid-June over the possible combination of their investment banking businesses, but the banks never reached a deal due to several issues, including the structure and capitalization of the combined operations, The Wall Street Journal reported, citing people familiar with the discussions.

The top executives from both banks, including their CFOs, who engaged in the June discussions went over ways to swap some of the banks' operations and intertwine portions of their investment banks while maintaining separate parent companies, the sources said. A potential deal would have had the banks play to each other's strengths, with Deutsche Bank's fixed-income trading and structuring business getting referrals from UBS, which would, in turn, tap into Deutsche Bank's deal-advisory teams in the U.S., according to the report.

UBS reportedly pulled out of the talks after the meeting, leaving Deutsche Bank, which itself was still conceiving the controversial sweeping restructuring it had eventually announced in early July.

The discussions illustrated how European banks are trying to deal with a low interest rate environment and slowing economic growth, the Journal wrote Aug. 25. The envisaged combination of Deutsche Bank and UBS' investment banking arms would have served as a test case for other banks and regulators to see whether a merger, without having to form a new base or commit to a full restructuring or new regulatory regime, could be feasible, according to the report.

In April, the banks were also said to have discussed merging their asset management arms, but the talks fell through due to disagreements over the control of a combined entity. Deutsche Bank also explored merger options with local peer Commerzbank AG, but the talks were discontinued, with Deutsche Bank saying a tie-up would not have created enough benefits to offset the associated risks.