The financial crisis forced Deutsche Bank to renegotiate its takeover of Postbank and allow the state a 3% stake.
Deutsche Bank, Germany’s largest commercial bank, has renegotiated its previously planned takeover of retail bank Postbank in the aftermath of the financial crisis, pledging to give the German state a real stake of three percent in this extremely private bank, according to German newspapers.
The new deal currently being worked out falls short of the ambitions of the partial nationalization of rival Commerzbank which was announced last week and provides for the state to have a 25 percent direct stake, as well as the power to ban passage of all major decisions made by companies.
However, Deutsche Bank’s renegotiation is significant, given that its Director, Josef Ackermann, has insisted that his bank can and will weather the financial crisis without resorting to state aid. He even added that he would be ashamed to take money from the latter.
“The financial crisis is leading the banking sector to a reorganization that would have been impossible just a short time ago,” said Hans-Peter Burghof, senior professor in the finance department at the University of Hohenheim, Germany. A financial analyst said: “The state would actually have a stake in one of the most private German private banks. »
Last September, Deutsche Bank reached a compromise that it would buy a 29.75 percent stake in its Postbank unit in the first quarter of 2009, with each share worth €57.25 (a total of 2. 79 billion euros – 3.7 billion dollars) thus completing the first stage of a takeover. Already at the time, the cost of this operation was estimated to be high. “Obviously, Deutsche Bank was hoping that the financial crisis would be over soon,” Burghof said. But the banking institute was wrong. Shortly after the deal was signed, US investment bank Lehman Brothers went bankrupt and financial stocks crashed.
“The purchase turned out to be a big mistake. Today, Deutsche Bank could acquire Postbank for just a fraction of that price,” Burghof continues. As of midday last Wednesday, Postbank shares were selling for just over €14.
This is why the agreement is being renegotiated. On Wednesday, the Handelsblatt and Financial Times Deutschland business daily newspapers said the new version of the deal was nearing completion and sees Deutsche Bank funding a fraction of the stake through its own shares.
This solution forces Deutsche Bank to reduce its capital expenditure, while it is currently difficult, in general, to generate capital.
In exchange, the German postal and logistics company Deutsch Post will obtain a stake of approximately 10 percent in Deutsche Bank. The German state owns 31 percent of Deutsche Post through the development bank KfW, so ultimately it will effectively get a three percent stake in the Deutsche Bank Group.
ACKERMANN REFUSED TO BENEFIT FROM A ‘NEW DEAL’
The emergency exit proposed by the State could suit Ackermann. His adamant refusal to receive state aid to pull his bank out of the financial crisis meant the influential director had to be vigilant as competitors around the world received public money for support. According to one analyst, Ackermann was at risk of suffering a classic competitive disadvantage.
If he accepted this ‘New Deal’, Ackermann could kill two birds with one stone. “This compromise would save his face,” commented banking specialist Wolfgang Gerke. The benefits it would bring him would outweigh his embarrassment, he added.
According to the newspapers, the first fraction of Postbank shares will remain expensive for Deutsche Bank because there will be no discount. Nevertheless, Postbank shares will not reverse their trend before the summer, which means that Deutsche Bank will have to wait until this period before making a takeover bid on Postbank shares, which are not yet determined.
A German spokesman declined to comment on what he called “market speculation.” “We are maintaining our first quarter investment,” he announced.
Deutsche Post declined to comment either. “We have reached an agreement with Deutsche Bank and we are sticking to it,” a company spokesperson said. The latter, however, confirmed that the supervisory board of Deutsche Post would discuss the agreement during a meeting to be held on Wednesday.
Deutsche Post has long tried to get rid of its Postbank unit; but in recent months it has had to increase its stake in the bank due to the financial crisis.
When the original deal closed in September, Deutsche Post was awarded a 50 percent stake in the Postbank unit. However, the crisis forced the latter to sell 1 billion euros of its shares in November. Deutsche Post being the only possible buyer, its stake amounted to approximately 63 percent.
AN ACCUMULATION OF LOSSES
Last week, Postbank admitted having suffered a heavy deficit in 2008. Insiders of this company estimate that it lost between 600 million and just under 1 billion euros. It is therefore not surprising that specialists in the banking field like Gerke consider that Ackermann should stop refusing financial assistance from the financial sector stabilization fund granted to him by the State. No one knows the risks that the takeover of Postbank is likely to entail, nor does anyone know how long the crisis will last.
On Wednesday, Deutsche Bank announced, based on provisional results, that it had lost 4.8 billion euros in the last quarter of 2008. Ackermann admitted that he was “very disappointed”.
“The current extremely difficult market environment has exposed several weaknesses in the bank,” Ackermann said in a statement. According to the bank, the losses were partly due to transactions in credit derivatives, equity derivatives, as well as stocks. The bank’s gains were also minimized by downward revisions to its values and assets, as well as by the costs of its restructuring.
Deutsche Bank said it expects to report a net loss of 3.9 billion euros for the whole of 2008. Final results will be released on February 5.