(Bloomberg) — Deutsche Bank AG Chief Executive Officer Christian Sewing didn’t rule out considering a takeover as early as next year if the lender’s share price recovers, while saying the priority remains implementing his turnaround plan.

Speaking in an exclusive interview with Bloomberg TV, Sewing said he was “laser-focused” on executing on his four-year strategy, which runs through 2022. But pushed on whether that means no deal before then, the CEO said the key phase of the bank’s transformation will actually be completed within the next three months.

a man wearing a suit and tie: Deutsche Bank AG Chief Executive Officer Christian Sewing at The Handelsblatt Banking Summit

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Deutsche Bank AG Chief Executive Officer Christian Sewing at The Handelsblatt Banking Summit

Christian Sewing on Sept. 2.


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Photographer: Alex Kraus/Bloomberg

“We’ve said 2019 and 2020 are the key years” of the restructuring, he said in the interview. While Sewing didn’t say if and when he’s willing to consider big deals, he reiterated he wouldn’t want to be the takeover target in any transaction. If the bank’s valuation were to recover, “we then have a different position, a better position,” the CEO said.

The comments come as the coronavirus pandemic has reignited takeovers and fueled deal chatter in boardrooms across the continent. UBS Group AG Chairman Axel Weber has drawn up a wish list of potential merger candidates, with Deutsche Bank among the most favored scenarios, Bloomberg reported last month. The two lenders briefly held informal talks last year and Sewing, too, privately favors a deal with UBS, Bloomberg News has reported.

‘Junior Partner’

“Consolidation needs to happen in Europe,” Sewing said in the interview. But for Deutsche Bank, “it’s important that we’re not a junior partner.” The CEO also pointed out that most of the recent deals in European banking have been domestic, because regulatory obstacles to cross-border consolidation remain.

For now, Deutsche Bank’s market value would place it in a subordinate position with almost any other partner of comparable size. Its stock market capitalization of about $18 billion compares with $41 billion for UBS.

The share price has started to recover since the beginning of the year, however, as a trading rally has bolstered Sewing’s turnaround. The stock has gained about 12% while UBS was little changed and banks overall lost almost a third of their market values.

chart: Deutsche Bank's has outperformed other financials this year

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Deutsche Bank’s has outperformed other financials this year

Sewing reiterated the bank’s upbeat guidance for trading revenue in the third quarter, saying he was “very satisfied” with the momentum in the period even though there had been a degree of “normalization” that would continue in the fourth quarter when compared with the first half. The bank will show a good performance especially in the investment bank when it reports earnings.

Third-quarter trading revenue is “in line with or better” than the guidance for 12% growth that Wall Street peers had given on average, investor relations head James Rivett said on a recent call with analysts, according to a transcript published Monday. That performance excludes the impact from debt valuation adjustments and Tradeweb, which reduced revenue in the third quarter of last year by 99 million euros ($116 million).

While revenue is being bolstered by the trading environment, the bank’s plan to reduce headcount has recently faced headwinds, because fewer employees want to take a new job during the crisis. Sewing said Deutsche Bank might have to consider “new ideas” to increase the speed with which people are leaving.

Read also: Deutsche Bank Revamps Work-From-Home Rule

“The different attrition ratio is not only because of Covid but also because of the change of the mood within Deutsche Bank,” he said. “People actually see that the bank is on the right path and like to stay.”

The lender would face “marginally higher restructuring and severance charges” if that trend were to continue as it shifts to “involuntary versus voluntary attrition,” Rivett said on the analyst call

The lessons learned during the pandemic will afford Deutsche Bank “incremental cost-cutting opportunities” in areas like office space and travel, Sewing also said. The bank recently reduced its office space in Zurich as it expects more people to work from home.

(Adds chart and details on staff attrition in penultimate paragraph)

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