Germany’s largest lenders, Deutsche Bank and Commerzbank, have announced that they will hold formal discussions in relation to a merger between the two organisations.

The announcement follows months of speculation that the banks may consider a merge, with the German government seeming to favour the deal as German finance minister Olaf Scholz called for a “national champion” bank last month when visiting London.

The German government still has a 15.5 per cent stake in Commerzbank, which it acquired after the lender was bailed out after the financial crisis.

A merger between the two banks could result in significant cost savings, in part due to the closure of branches. However, some critics have noted that integrating the firms could prove to be complicated and risky.

If the banks are to merge, the combined firm will hold one fifth of Germany’s high street banking business and control €1.8trn assets such as loans and investments and employ 140,000 people, while also becoming the Eurozone’s second largest lender behind BNP Paribas and have a market value of €25bn.

Last year, Deutsche Bank announced plans to cute more than 7,000 jobs, revealing its intention to heavily shrink its presence in New York.

This is not the first time the two banks have explored a merger, having previously held talks in the summer of 2016. However, the plan was shelved as the lenders decided to focus on restructuring.

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