Paying Dearly for German Mistakes

Christopher Flowers mulling it over. Source: Chris Ratcliffe/Bloomberg
Christopher Flowers mulling it over.
  • Why it matters

    Why it matters

    Mr. Flowers, who specializes in investments in banks, insurers and financial services providers, is widely active in Germany and Europe.

  • Facts


    • J.C. Flowers & Co. was founded in 1998 and manages investments worldwide worth $10 billion, or €8.94 billion.
    • The private equity firm has been burned by investments in HSH Nordbank and Hypo Real Estate.
    • Mr. Flowers at age 31 became the youngest partner at Goldman Sachs in 1988.
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Handelsblatt: Mr. Flowers, let’s start with the “fintechs” – those young technology firms challenging traditional banks. There is intense discussion here – we have the impression that you are skeptical as to whether fintechs will be around over the long run. Is that correct?

Christopher Flowers: I actually have a more nuanced opinion here. Of course, fintechs bring new ideas, changes and improvements. But there is also hype and promises that clearly can’t be kept. And in the meantime, there are so many fintechs that it will be impossible for all of them to be successful.

Could you give us an example?

We took a look at a fintech company from the credit-card sector. To form an opinion, we then called up friends at a large credit-card company and asked, “Do you approve of what they’re doing?” And they answered, “This is a great company, we love it — but there are 200 just like it. And we like them all.” (laughs) What I want to say is that it’s hard to predict which of the 200 will survive. It’s extremely difficult to achieve an overview.

What is your strategy? Do you wait until a company has successfully established itself and then buy it?

Our focus is not on firms in the start-up phase: the risks are too great. What we are looking for are firms with genuine revenues that are making a profit. As a rule, a company with a value of €100 million is the lower limit for us.

What businesses are interesting?

One of them is the credit business. But also the traditional banking business that is being reinvented.

Aren’t some fintechs overvalued? Think of the credit platform Lending Club. Its market capitalization is around $5 billion.

In general, yes. There’s a lot of overvaluation in some parts of the fintech market.

Are fintechs a threat to traditional banks?

Not really. Perhaps fintechs react quicker today, but I doubt that they will be able to preserve this head start in the long run.

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