Apollo Builds German Banking Group in the Shadow of Cerberus

(Bloomberg) -- Cerberus Capital Management LP isn’t the only U.S. private equity firm building stakes in German lenders.

Apollo Global Management LLC has joined forces with two other investors to purchase four small banks, mostly in northern Germany. The venture may extend its reach to other parts of the country with further acquisitions, according to Axel Bartsch, chief executive officer of Oldenburgische Landesbank AG. His firm acts as an umbrella for the German lenders that Apollo has bought into.

“The European banking industry isn’t exactly a hotspot for earning money," Bartsch said in an interview. However, companies that reach a certain size and have a good business model can achieve long-term success, he said, while low interest rates, digitization and regulation are increasing the pressure to consolidate.

The strength of Germany’s economy reduces the risks for investors, Bartsch said.

Apollo, together with Teacher Retirement System of Texas and U.K. investment company Grovepoint Capital LLP, is in the process of acquiring Wuestenrot Bank Pfandbriefbank, following their purchases of OLB and two other lenders in the past four years.

Bartsch wants to boost earnings at the four banks by increasing their combined customers by about a quarter to 1 million while cutting costs. OLB will focus on corporate customers and special financing as well as private and wealthy clients, he added.

Strong Owners

“From the beginning, it was clear that we can only act successfully as a larger bank,” Bartsch said, pointing to synergies. “Thanks to our financially strong owners, we knew that acquisitions would not fail for lack of money.”

The group of banks currently has total assets of about 20 billion euros ($23 billion) and employs around 2,300 people.

Like Apollo, Cerberus has invested in German banks even as declining revenue hurts earnings in the industry. Along with a stake in Deutsche Bank AG, Cerberus has holdings in Commerzbank AG and HSH Nordbank AG. Both companies are also vying for a stake in NordLB, Bloomberg has reported.

For its part, OLB is among companies that have signaled an interest in buying regional lender Dexia Kommunalbank Deutschland, though Bartsch declined to comment.

New Banking Group
2014Purchase of KBC Bank Deutschland from KBC Groep 
2017Purchase of Neelmeyer bank from HypoVereinsbank
2018Purchase of Oldenburgische Landesbank from Allianz
2018Agreement to buy Wuestenrot Bank AG Pfandbriefbank from Wuestenrot & Wuerttembergische

Original Story:
Apollos deutsche Bank könnte nach Übernahmen weiter zukaufen

Reporter on the original story: Stephan Kahl in Frankfurt at skahl@bloomberg.net

Editors responsible for the original story: Erhard Krasny at ekrasny@bloomberg.net;Andrew Blackman at ablackman@bloomberg.net

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