UPDATE 2-Deutsche Bank set to announce merger talks with Commerzbank - source

Deutsche Bank was set on Sunday to confirm merger talks with fellow German lender Commerzbank, according to a person with knowledge of the matter, an indication of progress in efforts to combine the two businesses.

Formal disclosure of talks increases the chances of concluding a tie-up between the nation's two largest banks. A merger has long been the subject of speculation and has been pushed for by the German government amid concerns about the health of Deutsche. Earlier this month a person with knowledge of the matter told Reuters that the management board of Deutsche had agreed to hold talks with Commerzbank on the feasibility of a merger.

"We are going to seriously evaluate a merger," said a person with knowledge of the matter. "But there is no guarantee that there will be a deal in the end," the person said.

Deutsche Bank declined to comment, while Commerzbank also had no comment. (Reporting by Tom Sims and Andreas Framke; Editing by Ed Taylor and Ludwig Burger and Keith Weir)