Glory Days to Job Cuts: Deutsche Bank-Commerzbank Over 150 Years
Glory Days to Job Cuts: Deutsche Bank-Commerzbank Over 150 Years
(Bloomberg) -- Deutsche Bank AG and Commerzbank AG said they’re officially starting talks on a deal that could combine the two largest publicly-traded -- and most storied -- banks in Germany.
The lenders -- both based in Frankfurt and 150 next year -- were set up to support German companies trading around Europe and beyond. The German government still views that role as crucial and favored a merger before the situation gets worse.
Here’s a timeline of key events that show how the banks got here.
How it All Started
1870
Deutsche Bank is founded in Berlin by a group of private bankers who want to create an alternative to U.K. banks that dominate the financing of trade. A group of merchants and bankers in Hamburg have a similar goal when they found Commerz- und Disconto-Bank. Over the coming decades, the banks play a crucial role in funding the development of German industries from electrical engineering to chemicals.
1914
German newspaper “Frankfurter Zeitung” reports that Deutsche Bank is the world’s biggest bank. World War I temporarily cuts off economic globalization and forces both banks to focus on their home country. After the war, Deutsche Bank plays a big role in the merger of automakers Daimler and Benz.
Great Depression
1929
Commerz- und Privat-Bank combines with Mitteldeutsche Creditbank while Deutsche Bank ties up with its biggest competitor, Disconto- Gesellschaft in October of that year. The same month, the New York stock market crashes, presaging the Great Depression.
1931
Pressure on Germany’s financial system rises and Darmstaedter und Nationalbank is forced to close, triggering a bank run. Commerz- und Privatbank remains solvent at first, but has a large volume of loans to companies in crisis. The government later orchestrates a merger with Barmer Bank-Verein and takes a 70 percent stake in the resulting institution after pumping in capital.
1933
Adolf Hitler’s National Socialists seize power in Germany and the banks soon push out Jewish executives and staff. Five years later German banks assist the state in systematically freezing and expropriating the assets of their Jewish clients.
War Years
1939-46
The banks take advantage of Germany’s aggression against other countries to open branches and acquire competitors in occupied territory during World War II. Deutsche Bank also plays a key role in helping the German Reich fund itself by purchasing gold from the Reichsbank and selling it in Istanbul. Some of that gold came from Holocaust victims, although studies have shown there isn’t a definitive answer to whether the bank knew that.
What is clear is Deutsche Bank’s Katowice branch loaned money to construction firms working at Auschwitz, where they built the IG-Farben factory and the concentration camp. Dresdner Bank, later bought by Commerzbank, bankrolled the SS, a unit that shot Jewish women and children, forced people out of their homes for deportation to death camps and stole tens of millions from their victims. After the war, the banks lose operations in Soviet-occupied Germany. The Allies break them up and ban the name “Deutsche Bank.”
Deutsche Bank has acknowledged that it has an ethical and moral responsibility in those crimes against humanity. Together with the government, German banks and companies set up a multi-billion dollar fund for reparations to Nazi-era slave-laborers.
1957-1980s
Deutsche Bank is reformed and prepares to return to its role of international financier. The following year, Anglo American Corporation of South Africa taps the bank to float the first foreign bond on the German capital market since 1914. The banks support Germany’s economic boom with everything from helping Volkswagen AG and other companies sell shares to financing the country’s energy imports. In the 1970s and 1980s the banks expand internationally, open branches across the globe and buy competitors.
1989-1999
Deutsche Bank moves in 1989 to acquire London-based Morgan Grenfell to become a global investment bank. It’s the first big step in an aggressive two-decade expansion that will come back to haunt the firm after the financial crisis. In 1999 it acquires Bankers Trust Corp. to expand in the U.S. and briefly becomes the world’s biggest financial services company. Goldman Sachs banker Paul Achleitner advises.
2005
Commerzbank leapfrogs Dresdner Bank to become Germany’s second-biggest publicly traded lender with a deal to take control of mortgage lender Eurohypo for more than 4.5 billion euros. Eurohypo’s portfolio of U.S. subprime mortgages, commercial real estate and Greek government bonds will later saddle Commerzbank with billions of euros of losses.
Financial Crisis
September 2008
Commerzbank agrees to buy Dresdner from Allianz SE for 9.8 billion euros to leapfrog Deutsche Bank in terms of German customers and branches. Lehman Brothers Holdings Inc. collapses two weeks later, sparking a global credit crunch. Later in 2008 Commerzbank plans to tap Germany’s 500-billion rescue package for 8.2 billion euros. Deutsche Bank forgoes direct state aid. Still, the bank uses the U.S. Federal Reserve’s emergency lending program.
2009
Commerzbank taps Germany for a second bailout. The bank receives a 10 billion-euro capital injection and hands the state a 25 percent stake in the company.
Capital Raising
2010
Deutsche Bank buys German consumer lender Deutsche Postbank AG to counterbalance its reliance on investment banking. The bank raises 10.2 billion euros of fresh capital from investors to fund that transaction and bolster its financial strength.
2011
Europe’s sovereign debt crisis is raging and Commerzbank takes about 2.2 billion euros of writedowns on its holdings of Greek bonds.
June 2012
Anshu Jain and Juergen Fitschen succeed Josef Ackermann as co-CEOs. Achleitner, by now the finance chief of Allianz, joins Deutsche Bank as supervisory board chairman.
September 2012
Jain presents his strategy for Deutsche Bank. It consists largely of committing to investment banking to benefit from the exit of the bank’s competitors. He seeks to avoid diluting shareholders with a capital increase.
More Capital
2013
Jain reverses course on part of his plan and taps investors for almost 3 billion euros to lift the bank’s capital levels.
2014
Deutsche Bank taps investors including a member of the Qatari royal family to raise 8.5 billion euros of capital. Jain describes his firm as the only “significant European global firm left standing’’ in investment banking, but has already started to cut back in some businesses, like commodities trading. That will accelerate.
April 2015
Deutsche Bank is fined $2.5 billion for its role in manipulating Libor, more than any other bank. Regulators say the amount would have been lower if Deutsche Bank had cooperated better. The matter undermines Jain because it originated in the investment bank. Stricter capital requirements are hurting Deutsche Bank’s ability to lift returns and Jain presents an update of Deutsche Bank’s strategy. The bank plans to shrink some investment banking businesses like repos and long-dated uncleared derivatives and sell Postbank. Commerzbank plans a dividend for 2015, the first since the payout for 2007.
Cryan Era
June 2015
Achleitner replaces Jain with John Cryan, a Deutsche Bank supervisory board member and former chief financial officer at UBS Group AG. Fitschen stays on for less than a year to help smooth the transition.
October 2015
Cryan announces deeper cuts to the investment bank as well as a 11,000 job reductions. He calls out former management for not doing enough to improve Deutsche Bank’s controls against misconduct and the quality of its information technology. He also signals opposition to another capital increase.
March 2016
Commerzbank names consumer banking chief Martin Zielke as CEO. The old CEO is leaving early and later joins Switzerland’s UBS Group AG.
Summer 2016
Deutsche Bank and Commerzbank are said to discuss a potential merger. The talks eventually fell apart and the lenders embark on their respective restructurings.
Job Cuts
2016 October
Commerzbank maps out a course to lift profitability by 2020 with aggressive client growth. At the same time, Zielke announces plans to exit much of the firm’s investment banking business and merge the remainder with its corporate-client unit. The bank also sets a goal of eliminating 9,600 jobs and suspends the dividend again to shoulder the restructuring costs.
Fall of 2016
Deutsche Bank investors and clients are spooked after the company confirms that the U.S. Justice Department is seeking $14 billion to settle an investigation into its role in the sale of mortgage-backed bonds that helped cause the 2007 U.S. housing market meltdown and ensuing financial crisis. The shares drop to the lowest on record. The bank eventually settles for less than half that amount, but has trouble regaining lost clients.
March 2017
Deutsche Bank seeks to rebuild confidence in its financial strength with an 8 billion-euro capital increase and plans to sell assets.
July 2017
Cerberus Capital takes a 5 percent stake in Commerzbank, making it the second-biggest shareholder. Four months later, the investor discloses a 3 percent stake in Deutsche Bank. Speculation abounds as to whether Cerberus plans to orchestrate a merger.
Commerzbank Suitors
September 2017
Commerzbank attracts suitors from across Europe and beyond. UniCredit SpA and BNP Paribas SA are said to have been in touch with the German government to indicate interest in the lender.
April 2018
Achleitner replaces Cryan with Christian Sewing. He stakes his reputation on achieving cost reduction targets and scales back Deutsche Bank’s ambition to compete with Wall Street banks in favor of a bigger focus more on Europe.
May 2018
Deutsche Bank says it will cut at least 7,000 jobs, including in its equity trading business, as Sewing acts on his pledge.
June 2018
Achleitner is said to consider reviving the idea of merging Deutsche Bank and Commerzbank. German Finance Minister Olaf Scholz renews his call for a strong German banking sector capable of accompanying companies abroad. Sewing says cross-border deals offer the best future for European banks, but that the time isn’t right.
September 2018
Bloomberg reports that a possible merger of Deutsche Bank and Commerzbank has won the backing of German officials who are seeking a new champion.
November 2018
Deutsche Bank shares hit another record low amid concern over the lender’s involvement in the Danske Bank A/S money laundering scandal. Deutsche Bank offices are raided in connection with the Panama Papers.
January 2019
Sewing says the worst of Deutsche Bank’s legal cases are behind it, but the bank is running out of time to restore revenue growth and convince investors.
February 2019
Commerzbank gives up most of its financial targets for 2020 after cutting an ambitious goal for revenue growth.
March 2019
Merger talks between Deutsche Bank and Commerzbank are said to intensify as Sewing gives up his resistance.
To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net
To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Christian Baumgaertel, James Hertling
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