If you want to know how German banks are doing, you just have to look at the Dax. More specifically, the subsector banks in the stock market. “Currently no top values” is there, if you are looking for the tops and flops of the industry.
And that, although some had hoped it would soon be a paramount value in this sector: the new “German Commerzbank” namely, which could soon arise. At least theoretically.
For since the weekend is finally official, what many market observers have speculated for years, but so far no one dared to think until the end: The two major banks in Germany speak openly about a merger. On Thursday they both met in this case. “Results open”, as it is called in the manager’s speech so beautiful. Which of course does not mean that it will really happen.
Are things on the right track?
Furthermore, the fact that it is finally being talked about does not mean that the merger would actually be desirable. Because who would actually benefit from the merger, ask a lot of industry participants. The two banks would probably have over many years to accomplish a merger that nobody knows if it works. This would not strengthen Germany as a business location, nor would it really push the banking industry forward. And if investors win in the mega-deal, one may also doubt. The Dax showed these days already, what he thinks of it: He dropped heavily since the announcement of the message.
So who benefits from this banking union?
So far, Finance Minister Olaf Scholz is probably wishing the merger. At national bank meetings he emphasized the importance of a national bank champion for Germany. Although this week, the Minister and the Government are trying hard to give the impression that the merger of the two houses is a purely private affair of the companies and that the banks are making that decision alone. Tax money would not flow in a possible agreement, so Scholz. And the government should also not interfere, appealed Chancellor Angela Merkel. But somehow nobody really wants to believe that politicians have not had their hands on the possible banking union. After all, the government would have two worries about the merger.
Two troubled institutes
Namely, first, the concern that their Commerzbank stock package is worth little. At the height of the financial crisis, the state of Commerzbank jumped as a savior. He wanted to rehabilitate the bank and then sell his shares again profitably, but he has speculated. Since then, the republic has owned 15 percent of the Commerzbank shares, whose value has fallen by about half. Secondly, the government worries that the story may soon be repeated, because at some point it may even have to help the crisis-ridden Deutsche Bank out of a tight spot. After all, this is considered systemically important, so it could mean a risk to the domestic and international financial system due to its size. And in light of various legal disputes and scandals, of which the manipulation of the Libor rate and the Cum-Ex businesses in Denmark were only the youngest, the largest German bank seems to be as badly hit as ever. If both financial institutions now joined forces, then the calculus might be both stabilized.
Commerzbank share
Course provider: This hope has already been referred several analysts, financial professors and ex-bank managers in the realm of the absurd. After all, two lame men do not make Olympic athletes when they join forces, that’s one more diplomatic answer. It would be true that a financial institution with total assets of around 2 trillion euros, 38 million customers in the business and private sectors and 140,000 employees would result. That sounds strong. In the European area, the German Commerzbank would still number three after the British HSBC and the French BNP Paribas. But the problem of the two united German banks is still in the German market and its special construction. If one compares the local banking sector with that of other countries, it is particularly noticeable how fragmented the sector is in this country. It’s not just the few big banks that are left after the wave of concentration, but also more than a dozen medium-sized Landesbanks, private and direct banks, and the savings banks and cooperative Volksbanken and Raiffeisenbanken. Recently, even the fintech companies come to it.
A lot of competition going on
So there is a lot of competition anyway, which is aggravated by the fact that not all institutes are aiming for pure profit maximization. The savings banks and Volksbanks, for example, are committed to promoting regional companies and in this sense, for example, grant many loans on slightly different terms than large banks would offer them. The consequence of this is that those cost advantages, as they can create corporations in other industries by their sheer size, do not have big banks.