Sinking ships

Struggling Commerzbank makes surprise bid for NordLB

NordLB
Great headquarters, terrible shipping loans. Source: dpa

Commerzbank has put in a surprise bid for NordLB, the ailing state-owned firm that is one of Germany’s largest commercial banks.

The nonbinding bid for the Hannover-based Landesbank is one of several being considered by its owners and capital suppliers, including the federal states of Lower Saxony and Saxony-Anhalt. NordLB, which has been hard hit by losses on shipping loans, has until the end of the year to shore up its capital.

Commerzbank, Germany’s second-largest finance house, is seen as a surprise bidder as it is currently struggling to get its own house in order. It had to bailed out by the federal government after the 2008 financial crisis and has been caught up in money-laundering and the cum-ex dividend stripping scandal.

Its offer came out of the blue as a merger proposal from Helaba, the Frankfurt-based Landesbank, seemed to be the option favored by many politicians. Financial investors Apollo and Cerberus, which have taken stakes in other German firms, have also made tentative bids. Potential acquirers have until November 28 firm up their bids and make them binding. In the meantime, the initial bid allows them to look into NordLB’s books.

Don’t Commerzbank on it

Industry sources estimate NordLB’s capital shortage at €3.5 billion, after it lost €2 billion in 2016 alone, due largely to defaults on shipping loans. Lower Saxony holds 60 percent of the Hannover-based bank and has said it is ready to inject more capital if other investors are involved. In the case of a merger with Helaba, it is likely to remain a shareholder in the merged bank.

On the other hand, if Commerzbank were to get the nod, the state would probably withdraw and allow the bank to be drawn into the private sector.

The apparent logic for Commerzbank is to expand its market share in retail and small business loans, which fits in with the strategy of the bank’s chief executive, Martin Zielke, to turn the bank around. Various other efforts to put it on a sustainable path to growth have failed. The federal government still holds a 15 percent stake in the bank after bailing it out.

Berlin would welcome a merger in any case, because it would further the government’s goal of consolidating the banking sector.

Both Commerzbank and Deutsche Bank, the country’s largest private banks, have seen their share prices fall below €10 as neither seems able to devise a credible strategy for recovery. Rumors that the two will eventually merge surface periodically.

Andreas Kröner covers banking and financial services for Handelsblatt. Darrell Delamaide adapted this story into English for Handelsblatt Global. To contact the author: kroener@handelsblatt.com

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