Sergio Ermotti, CEO of UBS. (Photo: Bloomberg)
Deutsche Bank AG and UBS Group AG briefly explored the idea of a mega-merger earlier this year that would have created continental Europe's biggest financial institution, people with knowledge of the matter said.
Top Deutsche Bank and UBS officials held preliminary discussions in recent months about a potential combination, according to the people, who asked not to be identified because the information is private.
The talks, which never proceeded beyond the initial stage, grew out of now-stalled negotiations to combine the firms' asset management businesses, the people said.
The move underscores the wide range of options Deutsche Bank has been willing to explore as Chief Executive Officer Christian Sewing hunts for a new strategy to present to investors.
There may be regulatory support for tie-ups amid increased U.S. competition: European Central Bank President Mario Draghi said in April that Europe's banking system is overcrowded and "the need for consolidation is very significant."
In theory, a deal would marry Deutsche Bank's fixed-income focus with UBS's bigger equities business. It would also bring together UBS's wealth management prowess with Deutsche Bank's access to German entrepreneurs.
Deutsche Bank shares have fallen 34% over the past year, giving it a market capitalization of $14 billion, while UBS is valued at $44 billion.
Still, plenty of hurdles would need to be overcome if they were to seriously pursue a transaction, ranging from headquarters location to job cuts and leadership of the combined firm.
The Swiss government may also be reluctant to allow a huge expansion in investment banking after shedding risks since a 2008 taxpayer rescue of UBS.
