Employees at Corealcredit Bank in Frankfurt are discovering that a change in ownership can sometimes come with a bitter aftertaste.
In March, when the specialist property lender Aareal Bank completed its takeover of Corealcredit, Aareal chief Wolf Schumacher hailed the acquisition as an “attractive” opportunity. “In recent years, Corealcredit Bank has successfully reoriented itself,” he said at the time. “We are pleased to greet Corealcredit Bank as a new subsidiary in the Aareal Bank corporate group.”
For Aareal Bank, the deal to buy its smaller competitor from the U.S. private equity group Lone Star Funds for €342 million ($450 million) was indeed attractive. The price was so low that Aareal booked an extraordinary profit of €150 million.
For employees of Corealcredit, however, the takeover was followed by an extraordinary shock: One in every five was slated for dismissal immediately after their welcome to Aareal’s world.
“The managing board has conducted a critical review of the business model and structures of Corealcredit Bank AG,” said a company document. “It is accordingly necessary to adapt the cost structure to the reduced business volume.”
So now 33 of 161 jobs will be eliminated.
More cuts could follow as outsourcing is considered in some areas. Compared with other takeovers and restructurings, this might seem insignificant. For individual workers, though, that doesn’t make a difference. Aareal had “sold us down the river,” one Coreal employee. “Nothing needs to be restructured here. We are being squeezed dry.”
It doesn’t sound like Aareal Bank is interested in a very active role for its new subsidiary, but Aareal has said the job reductions are due solely to lower business volume.
The figures at least give cause to stop and think. For three years now, Corealcredit’s annual net profit has remained constant at around €4.5 million – almost double what it was in 2009.
Targets were not only reached, but exceeded.
“In 2012, Corealcredit Bank AG acquired new business at a record volume,” its 2012 annual report stated. In the following year, the bank was able “once again to exceed the earnings goals.”
For the first three months of 2014, Corealcredit had a loss of €41.2 million. But an Aareal spokesperson said this was a one-time loss that doesn’t affect the new owner.
“The earnings of Corealcredit are fully within the framework of our expectations.” In the second quarter, the new subsidiary contributed €4 million to the operating profits of Aareal Bank.
Nevertheless, 13 positions are being eliminated in Coreal’s loans business alone, half of those in the business acquisition division. In the marketing sector, three branch offices are being closed.
That doesn’t sound like Aareal Bank is interested in a very active role for its new subsidiary. Aareal has said the job reductions are due solely to lower business volume.
Trust in the new owner, however, doesn’t seem very high.
The Corealcredit management board had to guarantee labor representatives that it would “carefully examine possibilities that would promote a stand-alone viability or a further sale of the bank.” This is doubtlessly scant solace for departing employees of Corealcredit.