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UPDATE 1-Deutsche Bank set to announce merger talks with Commerzbank - source

(Updates with comments from banks, background)

FRANKFURT, March 17 (Reuters) - Deutsche Bank was set on Sunday to announce merger talks with fellow German lender Commerzbank, according to a person with knowledge of the matter.

The planned formal disclosure increases the chances of progress on a tie-up between the nation's two largest banks that has long been the subject of speculation and has been pushed for by the German government amid concerns about the health of the country's flagship bank.

Deutsche Bank declined to comment, while Commerzbank also had no comment.

Earlier this month a person with knowledge of the matter told Reuters that the management board of Deutsche Bank had agreed to hold talks with Commerzbank on the feasibility of a merger.

(Reporting by Tom Sims and Andreas Framke; Editing by Ed Taylor and Ludwig Burger and Keith Weir)