Germany's Commerzbank AG said on Thursday it was in talks over a co-operation in retail and corporate banking with small regional bank SchmidtBank, which sources said may lead to a take-over.
SchmidtBank was rescued from bankruptcy by a consortium including Commerzbank and other banks in 2001 after it racked up a 1.3 billion euro ($1.6 billion) loss. The bailout left Commerzbank with a 16 percent stake in SchmidtBank.
"We are in talks with SchmidtBank about co-operation in several areas," a spokesman for Germany's third largest bank said.
"Obviously it's a strong retail bank that had a strong turnaround, which makes them attractive to Commerzbank for co-operation," he said but declined to comment on whether those talks could eventually lead to a take-over by Commerzbank.
A spokeswoman for SchmidtBank confirmed the talks and said they had not led to any tangible results and would take some time.
Banking sources said there was potential for a take-over of the bank. Such a move was not expected to be too costly for Frankfurt-based Commerzbank which is emerging from a two-year crisis that sent it deep into the red.
The country's banking industry is brimming with take-over and merger speculation and Commerzbank is one of four top German banks at the centre of the guesswork which includes talk of a domestic merger to avoid a foreign rival pouncing.
"A take-over would definitely be manageable for Commerzbank and would not pose a burden for their capital," said Guido Hoymann, an analyst at private bank Metzler in Frankfurt.
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