Here's How Commerzbank's Potential Suitors Stack Up in Germany
(Bloomberg) -- The collapse of Commerzbank AG’s merger talks with Deutsche Bank AG may have opened the door to a deal with a European competitor eager to expand in the region’s largest economy.
Given the hurdles to cross-border bank deals in Europe, lenders that already have a meaningful presence in Germany are well positioned because they have a greater potential for savings. That would put UniCredit SpA, ING Groep NV, BNP Paribas SA and Banco Santander SA at the top of this list.
Commerzbank -- which reported first quarter results on Wednesday -- has said it will fine-tune its strategy over the coming months, but Chief Executive Officer Martin Zielke has a radical option at its disposal. Both ING and UniCredit may be interested in acquiring Commerzbank, people with knowledge of the matter have said.
Here’s a look at how the the biggest foreign banks in Germany stack up.
UniCredit’s German unit wins on scale -- it is the biggest foreign bank based on its balance sheet and even ranks fourth among the country’s commercial lenders. ING and Santander have fewer assets while BNP doesn’t disclose the size of its balance sheet in the country. A Commerzbank deal could vault several of the banks into the number two spot in Germany, making for a significant challenger to Deutsche Bank.
UniCredit’s size in Germany is rooted in the breadth of its business, which runs from retail to investment banking with 348 branches. The local operation is also financially strong with a capital ratio that’s higher than that of local peers. While CEO Jean-Pierre Mustier has emphasized he wants to grow without the help of deals, he has weighed a multibillion-euro plan to buy a stake in Commerzbank and merge it with HypoVereinsbank, which it already owns in Germany, according to people familiar with the matter.
ING, the largest Dutch bank, is said to have reached out to both the government and Commerzbank to seek talks. Ralph Hamers, the CEO of the Dutch bank, has visited Zielke to talk about a possible tie-up, according to people familiar with the matter. He has pledged to cut fewer jobs than a Commerzbank-Deutsche Bank deal would have required, and to move ING’s headquarters to Frankfurt from Amsterdam, according to Manager Magazin. Publicly, Hamers has said he will look at deals in countries where ING operates if consolidation is taking place there.
ING’s German business is more efficient than many local lenders, with costs accounting for a lower share of revenue. That’s because it doesn’t have retail branches in the country and its digital-first strategy attracts thousands of new customers every quarter, making Germany into ING’s biggest market in terms of number of retail clients. Commerzbank would add a large number of retail and commercial clients, but that would come with about 1,000 branches in the country, which may make for a bad fit for an online only bank.
Like UniCredit, BNP Paribas is said to have held talks already in 2017 with the German government about Commerzbank. France’s largest bank operates about a dozen companies in Germany, from leasing to investment banking. The business best known to many Germans is brokerage Consors Bank, which BNP expanded with acquisitions and which overlaps with Commerzbank’s Comdirect online unit.
Adding Commerzbank’s commercial clients would give a significant boost to BNP’s corporate and institutional banking business. For now, BNP has said it wants to raise annual revenue in Germany to 2 billion euros next year from 1.68 billion euros in 2018. France’s largest bank reiterated last week that it will continue to focus on its digital transformation, rather than acquisitions.
That leaves Santander. The Spanish bank’s German unit is a big contributor to Santander Consumer Finance, a business focused on auto and consumer loans. The Spanish bank also boosted its retail banking in the country with the takeover of SEB AB’s consumer banking unit in the country in 2011.
Still, Santander’s focus has been on investing in more lucrative Latin American markets and the U.S. A big goal in Europe is finding ways to reduce spending as part of a global cost-cutting drive. Germany is no exception, with the bank reorganizing its business under one brand to improve efficiency. Santander finance chief Jose Garcia Cantera has said the lender isn’t interested in bidding for Commerzbank.
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