German banks think about more cooperation

German banks think about more cooperation

Low interest rates and digitalization are forcing the financial sector to merge further, according to deutsche bank and commerzbank.

There are too many institutions, especially in the fiercely competitive german market, said the heads of the two dax companies, john cryan and martin zielke, at a banking conference in frankfurt on wednesday. However, the two rough german institutes do not want to join forces. According to media reports, they had at least recently checked this.

Both "manager magazin" and "bilanz" magazine wrote that there had been talks between cryan and zielke in recent weeks about the options for a possible merger. At the end of august, however, according to information from "bilanz," the two board chairmen decided to pause for thought. Both are aware that an integration of deutsche bank and commerzbank would mean a huge effort.

"With a tightly executed integration – from an optimization of the branch network to the merging of central functions – the transaction would also quickly unfold its full charm," the "balance sheet" report said without naming sources. That is why it is considered likely that the two bank chiefs will resume talks by the end of the year at the latest.

Cryan himself did not comment on the possible language, but made it clear that a merger with commerzbank is not currently on the agenda. Asked whether the deutsche bank was looking for partners in the german market, the brite replied curtly: "no."Rather, he is striving to make deutsche bank smaller and simpler. The bank is concentrating on this strategy and still has a lot of work ahead of it in its restructuring process. Plans include the sale of the bonn-based subsidiary postbank.

On the stock exchange, the reports caused the prices of the two dax-listed shares to rise – they each recently gained more than three percent, making them the biggest gainers in the leading german index on wednesday. In the past few weeks, the shares had fallen to record lows because of the many problems in the sector and at the two banks. Since the beginning of the year, commerzbank and deutsche bank shares have been the biggest losers on the dax, down around 34 and 40 percent respectively.

Cryan sees a way out of the industry crisis in possible mergers, among other things. "We need more mergers – on a national level – but also across national borders," cryan demanded. "Only then will we be able to operate economically in the long term. And only then can we keep up internationally."Especially in germany there are "simply too many banks. Because higher rates are difficult to enforce; the continuing low interest rates are putting additional pressure on yields.

Zielke, who has been at the helm of commerzbank since may, is concentrating on working out a new strategy for the partially nationalized group. "We were highly profitable for many years, we were able to make enough profits, pay out bonuses and live relatively comfortably. But these paradisiacal conditions are over, I would even go so far as to say they are over once and for all," said the head of commerzbank. "The upheaval taking place at the moment is brutal, rapid and radical. Banks are forced to touch every stone, turn it over, reclassify it and sometimes even eliminate it altogether."

Savings bank president georg fahrenschon warned the industry not to distance itself too far from local customers: "i do not consider renewed calls for a fundamental wave of consolidation among credit institutions to be appropriate."Experts say mergers of large institutions will be difficult because of the many new requirements and supervisors’ desire for less complexity.

The head of the board of directors of credit suisse, urs rohner, therefore does not expect two major banks to merge. "I think that is an impossibility."Regulators would intervene in such a scenario, because they wanted banks to become smaller rather than coarser. But he called on europe’s major money houses to join forces in some areas to cut costs. "In order to remain independent, many banks will have to outsource central services such as account data management and information technology."


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