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German Banking in Crisis

Source: DPA
Deutsche Bank and Commerzbank are putting themselves on a weight to slim down.
  • Why it matters

    Why it matters

    Most of Germany’s banks have struggled to be profitable compared to their international peers. Deutsche Bank and Commerzbank have different ideas for how to turn the tide.

  • Facts


    • Commerzbank plans to cut 260 senior managers to streamline its retail banking business and retool for the digital age.
    • Deutsche Bank is considering taking its Postbank retail unit public, refocusing on private clients and investment banking.
    • Savings and loans banks have 50 million customers in Germany, more than any other banking group.
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Germany’s two largest banks, both struggling to stay profitable in an uncertain time for banks across the globe, are embarking on radical restructurings, potentially involving the sale of assets and job reductions designed to restore profit.

But the similarities between Deutsche Bank and Commerzbank end there.

Deutsche Bank is mulling a cutback in retail banking, possibly taking its retail subsidiary Postbank public, Handelsblatt has learned, in a move that analysts say could free up resources for its more lucrative business with private clients and investment banking. The discussions are part of a major restructuring expected to be announced later this year.

Commerzbank appears to be doubling down on retail banking in Germany. It plans to fire as many as 260 managers, gutting an entire layer of middle management, and cutting bank branches in a bid to become more efficient and retool for the digital age.

Such a strategic shift could wind up benefitting both banks, analysts said. In Germany’s crowded banking sector, dominated by state and quasi-state-owned savings and loans, the moves have the potential to clarify the banks’ strategy going forward.

“Institutions that are eager to grow have found themselves in a competitive situation where, in the end, there is not enough profitable business left for everyone.”

Martin Reitz, Rothschild

“Commerzbank can make a very good case for investing in retail in Germany,” said Neil Smith, a banking analyst with Bankhaus Lampe. For Deutsche Bank: “I think that they have other opportunities which may be more significant,” he said.

Germany is overbanked: About 2,000 banks, ranging from small savings and loans institutions, to cooperative banks, to state-owned banks are competing for customers and market share. That is far more than any other major country.

Foreign banks are increasingly getting in on the act, too, part of a broader shift across Europe as the euro zone crisis prompted policymakers to introduce common banking rules and a single supervisor across the currency bloc. Europe’s “banking union” has opened borders and prompted many to expect a wave of consolidation.

Spain’s Santander and French bank BNP Paribas have pushed hard to enter Germany’s busy market and win customers, and are repeatedly mentioned as prime candidates to snap up a part of Postbank should Deutsche decide to sell. Santander in fact lost out to Deutsche Bank in its bid to snap up Postbank six years ago.

“Germany, as the largest economy in the euro zone, is forcing foreign banks into strategic discussions,” said Rüdiger Filbry, a senior partner with Boston Consulting Group. Banks in Spain and France have to think about whether they need to be represented in their neighboring country.”


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All this competition may be good for customers, who are spoiled for choice and have a wide range of cheap products, including online options. But it’s bad for banks. Many of Germany’s banking groups are struggling to make a profit. Only 6 percent of German banks earn their equity, according to a report on the banking sector by Bain & Company.

“Institutions that are eager to grow have found themselves in a competitive situation where, in the end, there is not enough profitable business left for everyone,” Martin Reitz, the head of Rothschild in Germany, told Handelsblatt.

Both Commerzbank and Deutsche have struggled to turn the tide in this environment. Deutsche Bank, weighed down by legal costs, is expected to post another loss in the fourth quarter. Commerzbank began turning a profit this year for the first time since the financial crisis, but it remains part-owned by the German government, which had to bail out the bank back in 2008.

And yet there are opportunities.

Commerzbank’s head of private banking, Martin Riecke, said the bank was retooling for the digital age. Cutting management would mean it could more quickly respond to the chaging banking landscape and offer more new digital products quickly.

“We need change in one area. Digitalization also means acceleration. We have to implement changes much quicker,” Mr. Riecke told Handelsblatt.


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Commerzbank does have a window of opportunity here, according to Mr. Smith of Bankhaus Lampe. A portion of the German population is primed for more digital products, for example becoming increasingly interested in doing their banking by smartphone.

Commerzbank has an opportunity to lead the way here. Smaller banks in Germany, such as savings and loans, have a much higher concentration of branches across the country, as well as an older and rural customer base that is typically more averse to new digital products. Mr. Smith says this gives Commerzbank perhaps a five year window to establish itself as Germany’s prime retail bank in the new digital age.

Deutsche Bank is looking elsewhere. Already big in investment banking, it makes sense for Germany’s largest bank to focus more on wealthy private clients that could also benefit from the investment options that the bank has to offer.

Germany’s largest bank will certainly not be giving up on retail banking altogether. The possible sale of Postbank remains disputed within the company, according to banking sources, and the bank still has vast retail operations outside of its Postbank subsidiary. But the recent discussions do make clear exactly where the priorities lie.

“The major opportunity for Deutsche is private banking rather than retail banking,” Mr. Smith said. “It’s clear to me that the synergies between investment banking and private banking are higher than the synergies between private banking and retail banking.”


Christopher Cermak is an editor with Handelsblatt Global Edition in Berlin, covering economics and the banking sector. Yasmin Osman is a financial editor with Handelsblatt’s banking team in Frankfurt.Laura De La Motte is currently an editor with Handelsblatt’s finance desk and a specialist banking correspondent. Robert Landgraf is the deputy head of Handelsblatt’s finance section and is based in Frankfurt. To contact the authors: and

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