Merger talks between Germany's top two lenders, Deutsche Bank and Commerzbank, have ended in failure.
"We have concluded that this transaction would not have created sufficient benefits to offset the additional execution risks, restructuring costs and capital requirements associated with such a large-scale integration," Christian Sewing, chief executive officer of Deutsche Bank, said in a statement Thursday morning.
Deutsche Bank shares rose more than 2% on the news, while Commerzbank's stock fell by nearly 3%.
Reports about a merger between the two German lenders had been rife for months, heightening under the tenure of German Finance Minister Olaf Scholz, who has spoken out in favor of strong banks for the European nation. But there's been criticism too since it may lead to job losses.
A banking industry source with knowledge of the matter, who preferred to remain anonymous, told CNBC last month that there was not widespread support for the merger within Deutsche Bank.
"The general feeling is that the merger is not a great idea since Commerzbank doesn't have the same amount of credibility on the street as Deutsche Bank when it comes to clients and this can impact future trades," the source said.
Both banks have struggled to return to profit since the global financial crisis of 2008, and the subsequent euro zone sovereign debt crisis of 2011. In the past few years, Deutsche Bank in particular has made headlines for all the wrong reasons — from settlements with the U.S. Department of Justice, to management reshuffles, weak earnings, constant restructuring and steep stock price falls.
More recently, there's been reports of the Federal Reserve investigating its role in a money-laundering scandal at Danske Bank and an inquiry from two U.S. House of Representatives committees on the lender's ties to President Donald Trump. Last week, a report in U.K. newspaper The Guardian said the German bank could face legal action over a $20 billion Russian money-laundering scheme.
Shares of Deutsche Bank and Commerzbank are both down more than 35% over a 12-month period and more than 80 percent over a 10-year period. Christian Sewing, the bank's current CEO who took the helm in April 2018, has been making efforts to turn around the bank's ailing strategy. Various sources have told CNBC that competition from other players in the market is what pushed Sewing to fast-track the merger talks with its domestic rival.
Thursday's announcement comes after media reports had suggested that ING and UniCredit would be interested in acquiring Commerzbank. And that the Swiss bank UBS is looking at the asset management arm of Deutsche Bank.
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