After a recent double dose of bad news – an $8.9 billion (€6.6 billion) settlement for U.S. criminal charges and heavy losses on its mid-year balance sheet – the French bank BNP Paribas finally has something it can cheer about.
Chief executive Jean-Laurent Bonnafé announced last week the French financial giant had bought DAB Bank, an online subsidiary of the Munich-based HypoVereinsbank. With the deal, Mr. Bonnafé made good on a promise he made last year: growth, growth, growth – and, of all places, in Germany. In two years, the earnings are expected to hit €1.5 billion annually. The acquisition will make that possible earlier.
Expansion across the Rhine River is the right strategy at a time when France is faltering. Germany, on the other hand, is the strongest economy by far in Europe and will remain so for a long time.
HVB chief executive Theodor Weimer was trying to cut back his network of branch offices and DAB Bank no longer fit his business model. Considering BNP’s growth plans, his offer to sell came at the right time. And it was a golden opportunity for Cortal Consors, BNP’s German subsidiary.
Both DAB and Cortal Consors are pioneers in online banking. Their core customers are private securities dealers and asset managers who made it big in the booming stock market a decade ago. In second quarter reporting, DAB Bank once again showed how good it was, with earnings rising in the first half of 2014 by almost a third. It seems that its customers are trading once again.
But is that enough to make the acquisition a success? There are rumors that DAB Bank gave loans at attractive rates to its ex-parent company, Unicredit, and that sweetened the deal. Still, a clear strategy is missing for both of BNP’s online banks.
However, Internet banking is only one reason this deal makes sense. Finding a home in Germany is the other.
Last year Commerzbank’s depositing business was taken over by BNP. The French bank was also said to be interested in the state’s 17-percent share of Commerzbank. The head of BNP, Mr. Bonnafé, was even sighted in Berlin. But it seems the huge costs that would be inherited in such a deal – with old liabilities in shipping, real estate and state financing – outweighed the benefits.
If the bank’s plans work out, Germany will become a second domestic market and takeovers can help achieve this.
Years ago BNP was also interested in IKB, a German bank that caters to medium-sized enterprises and private equity funds. Maybe that interest will now be revived. The owner, Lone Star, is said to be taking a second shot at selling the bank.
Until something is decided, growth at all costs in Germany is a priority. The country has more than 1,200 home-grown medium-sized companies that are world leaders in their own sectors. For these companies, their homeland has long since become too small. They are growing mostly abroad and are perfect prey for BNP. The bank is represented globally in some 80 countries and is especially strong in Asia, where many German firms are being drawn.
BNP is not the only bank interested in these medium-sized German companies. There are many others. But if the bank’s plans work out, Germany will become a second domestic market and takeovers can help achieve this.
Robert Landgraf is deputy finance editor at Handelsblatt. He can be reached at email@example.com