DW: Challenge in 2018 for Deutsche Bank and Commerzbank

2017 was a difficult year for German banks due to low interest rates and structural changes. More specifically, Deutsche Bank and Commerzbank will be a year of challenges in 2018.

The course of Deutsche Bank and Commerzbank, which are two of the largest German banks, is indicative of the situation in the German banking sector. There is no doubt that 2017 was a difficult year. And in 2018 it will be a year of challenges for these two major banks in Germany.

In the positive 2017 it is noted that the difference between short and long-term interest rates was narrowed. While short-term interest rates are largely defined by the ECB, long-term ones, such as those for ten-year bonds, are now on the upside.

According to Marcus Risman, a financial analyst at Independent Research, this development ensures greater profit margins for banks. He believes, however, that the positive impact of interest rates on the earnings of financial institutions will be felt in lending during 2018. This is exactly what the investors expected to increase Commerzbank's share by 75% and Deutsche Bank by just 7%.

Cooperation between the two banks but not a merger

To deal with the difficult conditions that German banks have been experiencing since the international financial crisis, they have made staff reductions for almost a decade. Already in September 2016, Commerzbank announced that by the end of 2020, 9,600 vacancies will not be replenished in the coming years.

At the same time, Deutsche Bank is still struggling to win the customers it lost in the aftermath of the crisis of confidence in the fall of 2016 when the stability of the largest German bank was also questioned.

Deutsche Bank's major goals for 2018 are Postbank's "reintegration" following the vain attempts to sell it. Financial officer James von Molke had recently spoken about "the largest bank merger in Europe". At the same time, however, it made it clear that there is no merger with Commerzbank.

The fact is, however, that as long as the German government still holds a percentage of the German bank, a merger is unlikely.

It may have made sense to cooperate the two financial institutions in some areas in the near future, says Claus Ninging, vice president of the German Shareholders Protection Association, to conclude that this may save costs without affecting the business of the two banks.