* Formal talks indicate merger progress
* Both banks say outcome is uncertain
* Deutsche says aims to remain global bank (Updates with CEO statement, finance ministry statement, analyst comment)
FRANKFURT, March 17 (Reuters) - Deutsche Bank and Commerzbank confirmed on Sunday they were in talks about a merger, although both cautioned that a deal was far from a foregone conclusion.
Germany's two largest banks issued short statements following separate meetings of their management boards, a person with knowledge of the matter said, indicating a quickening of pace in the merger process.
"In light of arising opportunities, the management board of Deutsche Bank has decided to review strategic options," Deutsche said in its statement.
Christian Sewing, Deutsche Bank's chief executive, told employees in a note that Deutsche still aimed "to remain a global bank with a strong capital markets business...with a global network".
Sewing also said that "experience has shown" that many economic and technical factors could prevent a merger. For its part, Commerzbank described the outcome as open.
Formal disclosure of talks appears to boost the chances of concluding a deal floated in 2016 before the banks opted to focus on restructuring and which has since been the subject of renewed speculation.
The German government has pushed for a combination given concerns about the health of Deutsche, which has struggled to generate sustainable profits since the 2008 financial crisis.
The government, which holds a stake of more than 15 percent in Commerzbank following a bailout, wants a national banking champion to support its export-led economy, best known for cars and machine tools.
Berlin also wants to keep Commerzbank's speciality - the funding of medium-sized companies, the backbone of the economy - in German hands.
"We are going to seriously evaluate a merger," said the person with knowledge of the matter ahead of the announcement.
A person with knowledge of the matter had earlier this month told Reuters that the management board of Deutsche had agreed to hold talks with Commerzbank on the feasibility of a merger.
A merged bank is likely to rank as the third largest in Europe behind HSBC and BNP Paribas.
While the banks had not publicly commented on merger talks until Sunday, German Finance Minister Olaf Scholz last Monday confirmed that there are negotiations.
On Sunday, the ministry said that it acknowledged the announcement on talks and remained in regular contact with all parties.
On Thursday, the supervisory boards of both banks are scheduled to hold long-planned meetings, four people with knowledge of the matter told Reuters. The status of merger negotiations is expected to be discussed.
The merged bank would have roughly 1.8 trillion euros in assets, such as loans and investments, and a market value of about 25 billion euros ($28.3 billion), based on Friday's closing stock prices.
It would have one fifth of the German retail banking market and together the banks employ 140,000 people worldwide.
Germany's Verdi labour union has objected strongly to a possible merger between the two banks, arguing that the merged group would be a more attractive target for a hostile foreign takeover and saying that at least 10,000 jobs are at risk.
Some major shareholders have privately said they were against a merger, but the U.S. investor Cerberus, a large investor in both banks, has favoured talks, a person familiar with the matter has told Reuters.
Deutsche, the largest bank in Germany, Europe's biggest economy, emerged unscathed from the financial crash but later lost its footing.
In 2016, the International Monetary Fund called the bank the world's biggest potential risk among peers to the financial system because of its links to other banks.
German officials fear that a recession or big fine, for example, could derail the bank's fragile recovery.
Other than Deutsche, Commerzbank is Germany's only remaining big publicly bank, after a series of mergers.
Commerzbank, like Deutsche, has struggled to rebound, and German officials say it is vulnerable to a foreign takeover. If an international rival snapped it up, that would increase competition for Deutsche on its home turf.
"Would a domestic merger solve the issue?" UBS said in research note last week.
"We think the market would remain sceptical," it added, noting hurdles to a deal and improved profitability. ($1 = 0.8829 euros)
(Reporting by Tom Sims and Andreas Framke; Editing by Ed Taylor and Ludwig Burger and Keith Weir)