Deutsche Bank reported losses of $1.6 billion in the last three months of 2019. It cut staff but paid severances and wrote down the value of some assets. COVID-19 hasn’t made 2020 any better. CEO Christian Sewing recently said that he won’t rule out a takeover as early as 2021 if the bank’s share price recovers. However, Sewing is adamant that the priority remains implementing his turnaround plan.

Recently speaking in an interview with Bloomberg, Sewing remarked that he was “laser-focused” on executing on his four-year strategy, which goes through 2022. However, when pushed on whether that means no M&A activity before then, Sewing said the key phase of the bank’s transformation will actually be completed within the next three months.

“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,” Sewing said.

The CEO’s remarks follow as the COVID-19 pandemic has rekindled takeover discussions and led to more M&A gossip in boardrooms across Europe. UBS Group AG Chairman Axel Weber has drawn up a wish list of potential merger candidates. Deutsche Bank is among the most favored scenarios, Bloomberg reported in September. In fact, the two lenders held some brief, informal talks in 2019. It’s thought that Sewing also privately favors a deal with UBS, according to Bloomberg News.

Consolidation to Occur in Europe

“Consolidation needs to happen in Europe,” Sewing said in the Bloomberg 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.

The bank’s CFO recently said, “For Deutsche Bank we’ve been very focused on executing on our own strategy, and we think that strategy would prepare us to engage in merger activity when the time comes and the right opportunities arise,” James von Moltke told a Bank of America Securities conference. “So we are expecting this wave but we are also working hard to prepare on our side,” he said, noting that he supported the “appropriate or valid industrial logic” of M&A.

Deutsche Bank Would be the Target in Most Deals

Deutsche Bank’s current market value would put it in a subordinate position with almost any other partner of comparable size. The bank’s stock market capitalization of about $18 billion. UBS’s is $41 billion.

Deutsche Bank’s share price has begun to recover since earlier in the year, helped by a trading rally, which has also strengthened Sewing’s reversal. The stock has gained about 12% while UBS was little changed. Banks overall lost almost a third of their market values. In addition, Deutsche Bank’s has outperformed other financials in 2020.

Sewing emphasized the bank’s upbeat guidance for trading revenue in Q3, saying he was “very satisfied” with the momentum in the period despite the fact that there had been a level 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, the CEO said.

Although revenue is being helped by the trading environment, the bank’s plan to reduce headcount has recently faced resistance. That’s 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.

“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 lessons learned during the coronavirus pandemic will allow Deutsche Bank to make “incremental cost-cutting opportunities” in areas like office space and travel, Sewing also said.

The bank recently reduced its office space in Zurich,anticipating that more of its employees will work from home.