The German government is trying hard to fix their sick big banks. They are taking 2 very big badly managed and very sick banks and trying to merge them!
The result will be Europe’s largest bank if the merger goes ahead.
The teams of investment bankers advising them all are all saying that there will be huge savings with thousands of people losing their jobs and by updating their colossal IT systems. On the other hand merging 2 poorly managed banks together does not necessarily mean that you will end up with one healthy bank… The whole process will take years to complete, and who knows what the collection of Alpha male bankers will end up doing.
These two banks have a history of growing and spreading their wings in the world’s banking markets without much success…
Deutsche Bank has been Europe’s finest bank with the highest paid and best dressed executives with extravagant offices in every major city in the world. Your correspondent has been many times to their offices and met these super bankers, many of whom have been seconded to various governments to advise on huge infrastructure investments. They have also had the biggest and the best Mergers and Acquisition teams in the world after Goldmans Sachs and JP Morgan. The only problem has been that all this was hot air – they did not make any money and the poor dears now have to be saved.
Commerzbank is a bank that has had many ups and downs over the past 40 years. The bank has been a mess for years trying to follow the neighbouring banks in the different big global capital markets without much success. They merged in 2008 with another badly managed German bank, Dresdner Bank, in 2008 and later received some €18 billion in state aid. The government is one of their largest shareholders. In recent years things have gone, like Deutsche Bank from bad to worse.
So in conclusion, one must ask whether governments should get involved in banking when bankers have this track record of relying on taxpayers when things turn bad, but stuff their pockets with cash when things are looking bright.
From Finland’s point of view there is reason to be concerned. The ECB and the EU are pushing for joint banking insurance just in case something goes wrong the European banking sector…
Just have a look at the share price histories of these two banks from 1995 to the present – not exactly encouraging for two leading banks in one of the best economies in the world: