German banking history has been agreed, as Allianz cuts its losses
and sells Dresdner Bank to Commerzbank for €9.8 billion – seven
years after it paid €21 billion in an effort to build a
bancassurance giant. Commerzbank now needs to prove it can do
things differently, says Douglas Blakey.
After months of speculation, Germany’s
second-largest bank by assets, Commerzbank, has agreed to acquire
Dresdner Bank from Allianz. In the process it will overtake
Deutsche Bank, Germany’s national banking leader by assets, in
terms of branches and retail banking customers and also become one
of Europe’s largest banking groups with total assets of over €1
trillion ($1.4 trillion).
The deal comes at a time of profound
change in the German financial services market, a re-engineering on
a scale similar to the transformation of the Italian banking
industry between 2006 and the start of 2008. Deutsche Bank has now
made a bid for 30 percent of Deutsche Postbank, the country’s
largest retail bank outside of Germany’s savings banks (which
en masse boast a 50 percent market share of retail
banking), with an option to buy a further 18 percent, while
Citigroup recently sold its German business for €4.9 billion to
Credit Mutuel (see RBI 596). There have been smaller
deals, too: on 21 August, US private equity group Lone Star bought
a controlling stake in troubled corporate lender IKB Deutsche
Industriebank for an undisclosed sum.
Go deeper with GlobalData
Analyst and investor
reaction to the Dresdner/Commerzbank deal was lukewarm, however,
with Commerzbank shares falling by more than 10 percent the day
after the deal was announced on concerns it was overpaying. In
particular, analysts expressed caution about the targeted €5
billion in synergies, pointing out that Allianz had consistently
failed to effectively ‘synergise’ Dresdner in recent years.
Commerzbank itself admitted the acquisition will not bring earnings
accretion until at least 2012.
But Commerzbank’s CEO, Martin Blessing,
said: “We are taking advantage of a unique opportunity to make
Commerzbank the leading bank for private and corporate customers in
Germany.”
The acquisition of Dresdner certainly
completes a remarkable turnaround for Commerzbank: it tumbled to
near-collapse in 2003 after being hit by record-breaking investment
losses of €2.3 billion. The risky acquisition of Germany mortgage
house Eurohypo in 2005 for €4.5 billion (it was sold by Allianz and
Deutsche Bank) proved an astute buy, and helped Commerzbank quickly
regain lost ground in the German market.
The biggest deal in Europe so
far
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By GlobalDataFor insurance giant Allianz, the €9.8
billion sale of Dresdner – the biggest banking deal so far this
year in Europe – brings down the curtain on a difficult seven years
of ownership. The insurer had acquired Dresdner for €21 billion in
2001, believing the bancassurance model would pay dividends.
But the last straw for Allianz was credit
crunch related write-downs at Dresdner of around €5 billion.
Substantial losses at Dresdner’s investment banking arm resulted in
Allianz’s first annual loss since World War II in 2002 while the
past year has been especially painful for the insurer with the bank
posting losses in each of the past four quarters.
“The last six or seven years we have had
one big crisis after another,” Allianz CEO Michael Diekmann told
analysts.
“With the benefit of hindsight we might have done things
differently.”
As part of the sale, Allianz has also
agreed to cover up to €975 million of potential losses from assets
held by Dresdner’s securities unit.
Allianz is not stepping completely away
from retail banking: it is to keep 1 million banking customers from
Dresdner and form a new banking unit to serve them. It also has a
62.4 percent stake in a regional bank, Oldenburgische Landesbank
(OLB), which will now become its main retail banking product and
service provider, and all banking products sold by Allianz will be
purchased either from Commerzbank or OLB. Oldenburgische has
400,000 customers, meaning Allianz will have 1.4 million retail
banking customers after the Dresdner disposal.
The insurer will also become the biggest
shareholder of the new Commerzbank Group with a near 30 percent
stake, and Commerzbank will exclusively sell and distribute Allianz
insurance products. Commerzbank’s previous partnership in the
insurance sector with Generali will expire in 2010.
In terms of asset management, Allianz
Global Investors will become the preferred distribution partner of
Commerzbank; as part of the deal, Commerzbank is to sell
“significant” parts of its asset management activities to
Allianz.
11 million German retail
customers
Commerzbank will have to overcome the twin
hurdles of funding the deal and allaying concerns over integration
risk and its ability to find €5 billion in targeted synergies. On 8
September it started the process, issuing some 64.5 million new
shares to institutional investors to help pay for the deal.
The acquisition creates a universal bank
with 11 million German retail customers, a further 3 million
outside of Germany, and total assets of €1.09 trillion (compared
with Deutsche Bank which has almost €2 trillion in assets and 9.7
million domestic customers). The new Commerzbank group will have
1,540 branches but has already said that by 2012, this will be
whittled down to 1,200. The well-known Dresdner brand is to be
dropped.
CEO Blessing said: “With Allianz, we are
pleased to have a strong shareholder supporting our expansion
strategy and offering attractive products for our customers…
Commerzbank will continue with the successful business model it has
developed during recent years. Its strategic positioning as a
customer-oriented major provider of financial services with a focus
on Germany and a strong foothold in Central and Eastern Europe will
also remain intact.”
He added that, looking ahead, the bank
will also be prepared to “seize value-creating growth
opportunities” in Germany and in Europe.
A volatile, shifting
market
Deutsche Postbank remained an attractive
target for a large number of German and non-German financial groups
– though Deutsche Bank was 
always seen as the
likeliest acquirer as it looked to pin-down its domestic franchise
in a volatile, shifting market.
Santander has been one of the few
international banks to make a success of a German operation, having
built a very successful consumer finance operation, and, before
Deutsche Bank made its strike for Postbank, the Spanish group had
also made public its desire to acquire Germany’s leading retail
banking franchise. ING has also performed strongly in the country,
building up a customer base of around 6 million via its ING Direct
operation.
In May, to battle the threat from ING
Direct, Dresdner rolled out a wide-ranging direct banking service
called Direct24 (see RBI 592). A bank spokesman told RBI
Direct24 had got off to a flying start. “Some 300,000 clients have
signed up, one third of whom are new clients, since it was set up
12 weeks ago. Direct24 has attracted €4.4 billion of savings in
that period – one half is new money while the other half has been
re-directed from elsewhere in the bank.”
Despite this sort of success – which came
too late to rescue Dresdner – the key issue facing all commercial
banks in Germany whether domestic or foreign is the established
competitive threat from the country’s Sparkassen and co-operatives.
According to the Association of German Banks, more than half the
total savings deposits remain with savings banks, around 30 percent
are held by the credit co-operatives and only just over 15 percent
by the commercial banks.
