Deutsche Bank AG (DB - Get Report) moved to downplay a report suggesting Germany's biggest lending was preparing a massive capital increase as part of a potential merger with domestic rival Commerzbank AG (CRZBY) , saying Thursday that no such discussions have taken place among management board members.
The Financial Times reported Thursday that Deutsche Bank was looking to raise as much as €10 billion in fresh equity capital in order to demonstrate the potential strength of is balance sheet as it moves towards a tie-up with Commerzbank, a merger long-mooted in European financial markets but consistently dismissed as possible but premature by bank executives. Reuters reported the Deutsche Bank response.
"In light of arising opportunities, the management board of Deutsche Bank has decided to review strategic options," the bank said in a brief statement last Sunday. "In doing so, the management board of Deutsche Bank is focused on improving the growth profile and profitability of the bank."
Deutsche Bank shares were marked 3.1% lower in late afternoon trading in Frankfurt Thursday and changing hands at €7.28 each. Commerzbank slid 2.77% to trade at €6.94 each.
The tie-up talks, which both lenders insisted were only at the very earliest stages, would create Europe's third-largest bank with a market value of around €25 billion alongside a $2 trillion balance sheet.
From the Germany government's perspective, given its 15% stake it Commerzbank, it would also create a bank that could both compete on a global stage and continue to support a stable base of lending to Germany's small and medium sized companies -- known as the mittelstand -- which are the lifeblood of Europe's biggest economy.
Thursdays moves, however, could simply be a reversal of yesterday's solid gains for both Deutsche Bank and Commerzbank following a Reuters report that the ECB's deposit facility, which charges lenders 40 basis points for overnight deposits instead of paying interest, could have a tiered structure that would allow banks to pay less while being encouraged to lend more money into the real economy.
The ECB's aim, Reuters said, would be to return some of the $7.9 billion in has collected from the negative deposit rate, which first slipped below 0% in June of 2014, in order to kick-start growth in the region's moribund economy.
"If necessary, we (also) need to reflect on possible measures that can preserve the favourable implications of negative rates for the economy, while mitigating the side effects, if any," ECB President Mario Draghi said earlier Wednesday during a speech in Frankfurt. "That said, low bank profitability is not an inevitable consequence of negative rates."