The Business Times

Europe: Shares rebound, helped by bank merger talk

Published Mon, Mar 11, 2019 · 10:04 PM
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[MILAN] European shares had their best day in four weeks on Monday, rebounding from three straight sessions in the red thanks notably to merger chatter in the battered banking sector, which help offset worries over a slowdown in the global economy.

The pan-European Stoxx 600 index closed up 0.8 per cent, its best daily performance since Feb 15.

London's export-heavy FTSE gradually lost steam, as the pound rose on optimism about the progress of Britain's exit from the European Union ahead of a key vote in Parliament scheduled for Tuesday.

German lender Commerzbank was among the biggest gainers on the Stoxx 600, up 7.1 per cent, after reports at the weekend of a possible tie-up with Deutsche Bank, which also rose 5 per cent.

The management board of Deutsche has agreed to hold talks with Commerzbank on the feasibility of a merger, a person with knowledge of the matter said on Saturday.

On Friday, a German magazine said the CEOs of the two banks had been in intense talks for some days.

Berenberg's equity sales team said a merger between the two could make sense, given the overlap in their businesses, even though Deutsche has repeatedly said it needs to focus on increasing its own profitability.

Nevertheless, "failure to deliver on the ROTE (Return on tangible equity) target could force Deutsche to consider a more radical shift in strategy, possibly including a merger," they added.

Merger hopes lifted Charter Court Financial and OneSavings Bank up 11.2 per cent and 11 per cent respectively after the two UK challenger banks said they were in advanced talks about a possible all-share tie-up.

The index for euro zone banks rose 1.5 per cent.

Shares in Boeing fell 7 per cent in New York after some airlines grounded the company's new 737 MAX 8 passenger jet following Sunday's fatal Ethiopian Airlines crash.

European rival Airbus edged up 1.3 per cent, while Safran fell 1.7 per cent. The 737 MAX 8 uses LEAP-1B engines made by a joint venture of General Electric Co and Safran.

Among the top fallers was Pandora, down 5.5 per cent with traders citing a downgrade to sell from Carnegie which cited worries over a slow down of its growth in China.


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