The German banking industry is in the grip of merger talks again. This time, though, it is more than mere speculation in Europe’s most over-banked country.
Three big banks are for sale at the same time: Postbank, Dresdner Bank and Citibank. It is too early to tell which will end up with which, but trade unions are worried already about the potential loss of thousands of jobs. Trade union boss Uwe Foullong, chairman of Verdi, has pointed out that if Postbank and Dresdner Bank were to merge with Commerzbank, which has shown an interest, it would lead to a company with 84,000 people – and 20,000 jobs could be cut.
How this would affect the property market is difficult to predict because it is not known where these jobs would be cut. Given the fact that, on average, a German employee occupies 30 m2, it would mean 500,000 m2. Property people have so far not occupied themselves with possible outcomes because there are simply too many.
What is sure, though, is that a merger between Dresdner Bank and Commerzbank would have the greatest effect on Frankfurt. Dresdner Bank recently pulled the sale of its headquarters in the city because it did not want to create further turmoil among its staff.
The sale would have involved the 136m Gallileo tower, the 166m Silver tower and Gallusanlage 8. Atisreal, which was handling the sale, had already lined up interested parties. The sale has now been postponed until at least September.
Dresdner Bank’s merger with Commerzbank, whose 259m-high headquarters building is only a ten-minute stroll away, would make cost cuts possible because both banks have a very strong domestic exposure.
Eight years ago, merger talks between Commerzbank and Dresdner Bank broke down. Then Commerzbank chief executive officer Martin Kohlhaussen suspected that insurance company Allianz, which owned a majority stake in Dresdner, had torpedoed the plans.
“Driven by revenue synergies”
In an interview with German magazine Capital in November 2000, Kohlhaussen said that a merger with Dresdner was not only about cost savings, but also about creating additional revenues. “Mergers can only be driven by revenue synergies,” he said.
In 2001, Allianz bought Dresdner Bank. At the time it argued that it needed the bank and its branches across Germany to sell insurance and pension products, which the bank was already doing anyway. The merger did not go as planned. The bank dragged the performance of the insurer and thousands of jobs were cut. Now Allianz has put up for sale Dresdner Bank.
The fate of the investment bank Dresdner Kleinwort has not yet been determined.
Allianz is not just selling Dresdner. It is in the driving seat and is in talks with Commerzbank to make a joint bid for Postbank, in which it owns a stake already, to create a mega-bank. According to some press reports, Allianz and Commerzbank have already issued a €10bn bid for Postbank.
But there are other possible outcomes. Deutsche Bank, which has the deepest pockets, is considering its options too. “Should it come to banking consolidation in Germany, we won’t be standing on the sidelines,” Deutsche Bank’s chief executive Josef Ackermann recently told the company’s annual meeting of shareholders.
The bank gave up retail banking in Germany years ago in order to focus on the more profitable business of investment banking and managing the assets of wealthy individuals. The German state, which owns 30% of Postbank, is said to be backing a merger between Deutsche Bank and Postbank. But Ackermann has said the €10bn price tag is too high. Deutsche Bank is also looking at Citi’s German retail banking operations, which are said to be worth between €4bn and €5bn.
Foreign banks are interested
Despite the interest from German banks for the three banks for sale, it is not a given that it will be concluded as a domestic affair. Other banks, including Dutch ING Real Estate, Spain’s Santander, Swedish SEB, and France’s BNP Paribas, have been named as parties interested in the three banks for sale.
These banks are less driven, if at all, by achieving synergies. Above all, they would want a platform and break into the German banking market. Job cuts would not be high on their agenda and the impact on the property market would therefore be limited.
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