© Reuters. FILE PHOTO: Banners of Deutsche Bank and Commerzbank are pictured in front of the German share price index, DAX in Frankfurt

FRANKFURT (Reuters) – The management board of Deutsche Bank (DE:) has agreed to hold talks with rival Commerzbank (DE:) on the feasibility of a merger, a person with knowledge of the matter told Reuters on Saturday.

First unofficial contacts took place within a very small group and the mandate from Deutsche’s board was given more than a week ago, said the source, speaking on condition of anonymity.

Talks were at a very early stage and could fall apart, the person added, confirming information reported earlier by the Welt am Sonntag newspaper.

A spokesman for Deutsche Bank and a spokeswoman for Commerzbank both declined to comment.

Speculation about a possible merger between Germany’s two largest listed banks has been rife for months, heightening under the tenure of Finance Minister Olaf Scholz, who has emphasized the importance of strong banks.

Both lenders have struggled to return to sustainable profitability since the global financial crisis, and the government holds a stake of more than 15 percent in Commerzbank following a bailout.

Deutsche is regarded as one of the most important banks in the global financial system, but has been plagued by three years of losses, ratings downgrades, failed stress tests, and money laundering scandals.

Its chief executive, Christian Sewing, has said publicly in recent months he was focused on restoring profitability before taking on a complicated merger project.

Sewing is expected to report back to the board before the bank takes further steps, the source said.

Commerzbank’s chief, Martin Zielke, has been more open to the idea of a tie-up, a person with knowledge of his thinking said. Last month, he said speculation about a merger was “understandable”.

The two banks flirted with a merger in 2016 but talks fizzled out after they decided to focus on restructuring.

Last month, a person familiar with the matter said that U.S. investor Cerberus Capital Management, a major shareholder in both Deutsche Bank and Commerzbank, was open to a merger, increasing chances of a tie-up.

Deutsche Bank has more than 20 million personal and business customers, and Commerzbank around 18 million.

Based on Friday’s closing prices, a combination of the two banks would have an equity market value of more than 24 billion euros ($27 billion).

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2019-03-09