German public-sector banks Helaba and Deka are considering a potential tie-up, people close to the matter said, in a sign that the country’s fragmented banking market might be moving toward consolidation.
Helaba is one of Germany’s landesbanks which are traditionally owned by savings banks and regional states. They act as wholesale banks helping local savings banks arrange large loans. The landesbanks also have their own corporate lending and mortgage businesses and most of them – except Helaba – needed bailouts in the financial crisis.
There is pressure to consolidate because low interest rates and competition from listed or cooperative banks as well as online start-ups is squeezing their margins.
The two Frankfurt-based banks, both owned by municipally-held savings banks, are in exploratory talks which could lead to a merger that could eventually serve as a catalyst for further deals with other public-sector banks, the sources said.
The chances of a deal will depend mainly on whether Deka’s owners – regional savings banks – can agree on a new structure for Deka, which also serves as an asset manager for all of Germany’s savings banks, they said.
“Defining a business model for the merged bank is the key prerequisite,” one of the people said.
Deka is owned by twelve regional savings banks which are in turn major shareholders of other landesbanks that compete with Helaba. Convincing the owners of rival landesbanks such as Munich-based BayernLB and Stuttgart-based LBBW to strengthen Helaba is seen as a big challenge, a savings banks manager said.
Germany’s national savings banks umbrella association DSGV has pushed for mergers and its president Helmut Schleweis last year floated the idea of creating a super-landesbank.
At a savings bank conference in Hamburg on Tuesday and Wednesday Schleweis repeated the idea.
“We will become more efficient if we have a central bank for the savings banks”, he told representatives of Germany’s 385 savings banks. Earlier, he had said that Deka could be a nucleus of a such deal.
Although the German government has little influence on the landesbanks, finance minister Olaf Scholz told the same conference that he expected further changes within the sector in coming years.
Plans to merge landesbanks in the past never got off the ground because it was impossible to align the interests of the different German regional states and municipal savings bank organizations that own them.
In October, the DSGV said that it was considering options for the future of landesbanks and savings banks, triggered by a sales process for Hannover-based NordLB.
The German states of Hesse and Thuringia are minority shareholders in Helaba and some savings bank managers want to buy the states out of a merged bank comprising Helaba and Deka.
“We want no states in Deka,” one savings bank manager said.
Deka, Helaba and Thuringia and the leading savings banks organizations declined to comment, while Hesse had no immediate comment.
Source: Reuters.com