The asset management arms of Deutsche Bank and UBS are in serious talks over a potential merger which would create a new European fund management giant with assets under management (AUM) of €1.4trn, according to reports.
The FT reports that discussions about a potential deal have been going on "for a couple of months", according to a person close to the situation.
If the deal is successful, the new group would become a rival to Europe's largest money manager, Amundi, in terms of AUM, making it larger than France's AXA IM and LGIM in the UK.
According to the FT, one of the options on the table is that UBS would fold its €700bn asset management unit into Deutsche Bank's DWS, receiving shares in the latter in exchange.
DWS currently €662bn has in assets under management and is 79% owned by Deutsche. The deal would see the bank remain its top shareholder, but its share of the pie would be diluted.
Some 12 years ago, UBS was the world's largest asset management, but assets declined dramatically as a result of the financial crisis. The business now sits in the 16th spot globally, according to Willis Towers Watson.
Other firms have also shown interest in DWS, including Allianz, Amundi and multi-boutiques Natixis Investment Managers and Generali, the FT reports. According to its sources, a deal between UBS and Deutsche is by no means guaranteed and an announcement is not imminent.
DWS has seen its shares climb some 35% since the start of the year to €31.78, meaning the business now has a market value of €6.42bn.
Talks of the merger come as Deutsche Bank is holding its own merger talks with Germany's second largest lender, Commerzbank. The FT quoted people familiar with the bank's internal discussions saying that an outright sale of its DWS arm was "not seriously considered".
DWS had a difficult 2018, having seen its assets drop by 5.4% to €662bn and suffered outflows of €22bn, which have been attributed to the one-off effect of redemptions relating to US tax reform, the pressure from MiFID II and a number of large insurance mandates being withdrawn.