Merger plans energising Europe's banking sector
The Italian bank Unicredit has indicated that it would be interested in taking over Commerzbank if the negotiations for latter's merger with Deutsche Bank fail. Trade unions fear that the merger could lead to drastic reductions in staff. Commentators explain what kind of mergers make sense - and why.
The bigger the better
The European banking sector must consolidate if it is to survive, writes The Economist:
“The evidence from America and Asia suggests that scale is becoming a bigger advantage in banking than ever before, allowing the huge investments in technology platforms and data-analysis to take place. Europe has too many lenders - 48 firms are considered important enough to be subject to regular 'stress tests'. The banks complain that the reason for this is that Europe has not harmonised its rules and regulations. But this is only half the story. Most big banks are loth to cede their independence, and their bosses love the status that comes with running a big lender.”
Face the digital revolution as one
Mergers are practically inevitable for the banks in view of current challenges, financial expert Thibaut Madelin writes in the business paper Les Echos:
“In the context of low interest rates that have caused bank revenues to plummet, regulatory pressure that reduces their margins, and above all in view of the digital revolution that is changing customer expectations and allowing the emergence of new competition, economies of scale play an essential role. The sector urgently needs to invest in new technologies. Faced with the US financial giants, which are faring better financially and can afford to spend several billion dollars a year on digital technology, the European banks risk losing the battle.”
Patriotism no good in this sector
Der Standard warns against the merger between Commerzbank and Deutsche Bank that Berlin is pushing for:
“Both of Germany's market leaders are weak at the moment. A merger wouldn't strengthen them because it wouldn't create any notable synergies. In fact the only thing that speaks for it is the desire for a national champion that can compete in the European premier league. Such patriotic motives may be fitting in football, but not in the banking sector. A poorly positioned German major bank wouldn't even help the German economy. What the EU really needs is integrated European banks that are not dependent on any one national market.”
Too risky for taxpayers
A merger between the two banks could end up being expensive, warns Deutschlandfunk:
“In the event of a merger the level of risk for taxpayers would increase. Deutsche Bank is already highly system relevant. Bailing out a merged high street bank would be a lot more expensive than it is now. That's why from the taxpayers' point of view Berlin's determination to push through a merger is incomprehensible. The government should know better: after taking over Dresdner Bank Commerzbank got into such a precarious position during the financial crisis that the state had to spend billions in tax money on bailing it out.”
Germany can get away with anything
The German Minister of Finance Olaf Scholz gave his approval for a merger a few days ago. If something similar had been attempted in Italy the reaction would have been entirely different, Berlin correspondent Tonia Mastrobuoni points out indignantly in La Repubblica:
“Imagine what would have happened if an Italian economics minister had confirmed the merger of the country's two largest private banks while the management of the banks remained stubbornly silent on the subject. And just imagine if on the same day the shares of the two banks soared, bolstered by the implied state bailout. ... Italy would have landed in the dock a minute later. And the first country to point a finger due to the risk of a dirigiste operation, dubious financial logic and an illegal bank bailout using public money would have been Germany.”
Too weak on their own
Negotiations are vital to make the two banks competitive once more, the Frankfurter Allgemeine Zeitung concludes:
“Success doesn't necessarily have to mean a merger. Cooperation solutions on IT or other back office areas can also lower costs permanently at both institutions. So it's good news that Deutsche Bank and Commerzbank are now looking at different options. ... The employees will be among the losers. But without far-reaching job cuts the two banks won't be able to catch up with the international competition, which is forging ahead. The critics of such a merger must remember that neither Deutsche Bank nor Commerzbank have any other option. They're too weak to negotiate with foreign banks on equal terms.”