The talks between the two institutes have only been running for a few days. But the likelihood is high that in the end, as with Deutsche Bank and Commerzbank, there will be no merger. Two people familiar with the project told Handelsblatt that they did not expect a merger. Other parties who are actually positive about consolidation now consider a merger unlikely.
The main reason for this is that some Deka owners are skeptical about a merger. They warn against carelessly giving up the fund provider’s functioning business model. In addition, participants point out that a merger would be extremely complex. One of the things that needs to be clarified is what role the state of Hesse should play in the future at a merged institute.
Sparkassen President Helmut Schleweis, who is the biggest driver and supporter of a merger, knows about the difficulties: It is “not a matter of course that the open-ended examination process leads to success”, he said last week in the “Sparkassen-Zeitung”. “Because there will still be many hurdles.”
Both banks are currently processing the orders of their committees, explains the Deutsche Sparkassen- und Giroverband (DSGV) when asked by Handelsblatt. “The first step is to develop a common understanding of the depth to which closer cooperation between the houses is possible.” Helaba and Deka did not want to comment.
The big role model DZ Bank
Should a merging of both banks fail, this would be a big setback for DSGV boss Schleweis. He has spoken out clearly in favor of a merger and sees it as the starting point for a comprehensive consolidation of the public service sector. In the end, from his point of view, there should be a central institute that provides the almost 400 savings banks with services and deals with the business that the institutes alone cannot manage.
“A merger of Helaba and Deka would create a nucleus for a central institute,” Schleweis said in an interview with Handelsblatt in November. “The willingness and the possibility to add more banks are there. That’s just the beginning.”
In addition to Helaba, there are currently three larger Landesbanken: LBBW in Stuttgart, BayernLB in Munich and NordLB in Hanover. Deka is the central fund company of the savings banks, but some of them offer the same services as regional banks.
Many top public law managers and bank supervisors consider this list to be inefficient and are pressing for consolidation. The cooperative financial sector is considered a role model for many. The Volks- und Raiffeisenbanken – the strongest competitors of the savings banks – can now get by with a top institute, the DZ Bank. The question is how long the savings banks will be able to afford several central banks in the face of increasing pressure from negative interest rates and strong competition.
Already in December it became apparent that a merger between Helaba and Deka is not a sure-fire success. At that time, the Deka Board of Directors decided to examine closer cooperation with Helaba – but not a merger. In addition, the decision was not even made unanimously. The Helaba board of directors then unanimously voted for talks a few days later in order to “discuss how the strengths of both companies can be brought together in an efficient central institution of the Sparkassen-Finanzgruppe”.
However, there are different perspectives among Deka owners. Baden-Württemberg has already made reservations in the debate about a central institute. According to financial circles, Sparkasse representatives from other regions also caution. Insiders meanwhile speak of three groups: supporters, opponents and skeptics, who are generally in favor of consolidation, but also point out the major hurdles in a merger.
“A merger would be extremely complex”
Hardly anyone in the Sparkasse warehouse doubts that merging Deka and Helaba would have many economic advantages. In the opinion of those involved, there would be synergies above all in three areas: in the lending business, in asset management and in staff functions.
On the other hand, however, a number of problems have to be solved. “A merger would be extremely complex,” says a person familiar with the subject. Numerous legal and tax issues need to be clarified. “Everything can be solved, but a lot of work.”
Since Helaba and Deka are heavily active in the real estate business, the institutions may have to pay real estate transfer taxes in the event of a merger. “It’s a really big chunk,” says an insider. Helaba property subsidiary GWH alone manages around 50,000 apartments.
A merger would also be challenging because the two institutes have different legal forms. Deka is a federal institution under public law and is supervised by the Federal Ministry of Finance, among others. Helaba is an institution under public law under state law – based on a state treaty between Hesse and Thuringia. Among other things, this defines the tasks of Helaba – and the federal states would have to agree to significant changes.
For many savings banks from other regions, it is clear that Helaba would have to give up its legal form in the course of a merger. Because they do not want a central bank for savings banks to ultimately depend on decisions made by state ministers in Hesse or Thuringia. The State of Hesse currently holds a good eight percent in Helaba, the Free State of Thuringia four percent.
As an ideal solution, DSGV President Schleweis and other savings bank officials envision a central bank without the participation of the federal states. But if Helaba and Deka merged, it would be time-consuming and expensive to buy out the countries. This applies particularly to Hessen, which, in addition to its direct participation, is also committed to Helaba with a silent contribution of EUR 1.92 billion.
In addition, everyone involved would have to agree whether and how the Hessen Economic and Infrastructure Bank (WI-Bank) will be detached from Helaba. Among other things, the institute is active in structural, economic, social and housing promotion.
In principle, many savings banks have abdominal pains to give up Deka’s clear business model and homogeneous ownership structure as part of a merger. The savings banks bought the Landesbanken ‘s 50 percent stake in Deka in 2011 and have since been the sole owner of the fund company. And since then, from the perspective of the savings banks, Deka has developed well with its clear focus on fund business and asset management.
More: Helaba boss Herbert Hans Grüntker is to control NordLB in the future. In addition, the Sparkassen-Finanzgruppe sends restructuring expert Matthias Wargers to the supervisory board – and wants to monitor the shrinking rate of the Landesbanken.