By Elisa Martinuzzi, Christian Kraemer and Tom Sims

LONDON (Reuters) – Five years after Deutsche Bank and Commerzbank aborted an attempt to merge, an uncertain outlook for bank profitability and Germany’s need to plug a hole in its budget are rekindling speculation about a potential deal.

Germany has said it is looking at all options to raise funds by selling stakes in some of the 100 or more companies it owns.

Though a sale of its remaining 15% holding in Commerzbank isn’t imminent, Finance Minister Christian Lindner is open to a disposal and ultimately would prefer the government exiting the stake, according to a person familiar with his thinking.

A merger with Commerzbank would allow Deutsche Bank to further diversify away from volatile investment banking earnings, bolstering the lender’s longer-term stability, another factor that could sway the German government, said the person, speaking on condition of anonymity.

Deutsche Bank, which has completed the bulk of a multi-year restructuring plan, has recently stepped up internal discussions on deals, including possible purchases of banks such as Commerzbank and ABN Amro, Bloomberg News reported on Friday, without naming sources.

Deutsche Bank in recent months has come closer to reopening the idea of a merger with Commerzbank, even if there are no live discussions, a second person with knowledge of the situation has told Reuters.

Officials for the finance ministry and a spokesperson for Commerzbank didn’t immediately reply to requests for comment made outside business hours. Deutsche Bank declined to comment.

Deutsche Bank shares closed down 1.23% on Friday to 12.05 euros, valuing the bank at 25 billion euros ($27.37 billion). Commerzbank shares ended the day little changed at 11.35 euros, valuing it at 14 billion euros. A combination would be complicated by Deutsche Bank’s low valuation, assets that would need to be marked down and could lead to painful job cuts to reap the benefits of combining overlapping businesses. It trades at a fraction of its book value.

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Deutsche Bank Chairman Alexander Wynaendts said in November the company wanted to be ready for M&A if the opportunity arose.

“The chances of a sizeable transaction are relatively low in the near term given the many hurdles,” Anke Reingen, an analyst at RBC Europe, wrote in a note to clients on Saturday.

But press speculation and previous comments by the bank have increased the likelihood of a move, she said.

Germany’s stake in Commerzbank dates back to the global financial crisis of 2008 and is still loss-making for the government.

According to documents from the German finance ministry, seen by Reuters, the government plans to raise up to 4 billion euros this year by selling company stakes. The money would be funneled into Deutsche Bahn, the state-owned rail company.

Sueddeutsche Zeitung on Dec. 28 reported Germany had hired an investment bank to review the Commerzbank stake, without identifying the adviser.

Commerzbank has also long been seen as a potential partner for UniCredit, which is already present in Germany through HVB, and the two reportedly held merger talks before Russia invaded Ukraine in 2022. A spokesperson for Unicredit declined to comment.

($1 = 0.9133 euros)

(Reporting by Elisa Martinuzzi, Christian Kraemer and Tom Sims. Additional reporting by Pablo Mayo Cerqueiro and Emma-Victoria Farr. Editing by Anousha Sakoui, Ros Russell and Christina Fincher)