Commerzbank and Deutsche Bank would gain little by merging

GERMANY’S ECONOMY may be slowing, but its financial capital is booming. New towers are rising to join those of Commerzbank, Deutsche Bank, DZ Bank, Helaba and others on Frankfurt’s jagged skyline. More are on the drawing board. Had you read no financial news for the past decade, you might presume that Germany’s banks were thriving too.

How wrong you would be. Bankers grumble about subterranean official interest rates—they must pay the European Central Bank 0.4% a year to deposit cash—that show no sign of rising. Those compound an old problem: Germany’s extraordinarily crowded banking market. The country has 1,580 banks, grouped in three “pillars”: private, public and co-operative. Although the grand total is shrinking by 40-60 a year, the public pillar still contains 385 Sparkassen—savings banks, mainly municipally owned—and half a dozen Landesbanken—regional lenders, such as Helaba, that also act as clearers for Sparkassen. There are 875 local co-ops. Their clearer and corporate lender, DZ Bank, is Germany’s second-biggest bank by assets.

Some, to be sure, have found ways of making money. Unencumbered by the cost of running branches, DiBa, an online bank owned by ING, a Dutch lender, has clocked up double-digit returns on equity (ROE). But...



via The Economist: Finance and economics Business Feeds

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