One source said discussions over a potential merger have been taking place "for a couple of months".
It was said several weeks ago that UBS was in discussions with Deutsche Bank to acquire the firm’s asset management arm DWS Group, but it has now developed the two groups are likely to merge, competing with industry leaders BlackRock and Vanguard based in the US.
One potential structure of the move would involve UBS separating its €700bn asset management unit and merging it with DWS in exchange for shares in the larger group. Deutsche Bank holds a 79% share in DWS which has €662bn assets under management (AUM). The deal would result in Deutsche’s interest diluting but it would remain the largest shareholder.
UBS was formerly the world’s largest asset manager before the financial crisis hit. If the merger is agreed, the newly formed group would overtake AXA and Legal & General and would compete with Europe’s largest asset manager Amundi which has €1.4tn AUM.
Deutsche Bank has been in long-term merger talks with Commerzbank, which includes the sale of Deutsche's Xtrackers ETF business. Deutsche's 79% stake in DWS is said to be valued up to $5bn.