From Madrid to London and Tokyo to Beijing, banking deals have become the flavor of the summer. Everywhere, that is, but Germany, where the financial capital, Frankfurt, has settled into its dog days without a significant merger or takeover to its credit.
On Monday, Commerzbank called off talks to buy BHF-Bank, a small bank based in Frankfurt that is owned by the ING Group. The deal would hardly have been a blockbuster: BHF, with 2,600 employees, 15 branches and a book value of 1.2 billion euros (US$1.4 billion), would have been an easy lunch for Commerzbank, Germany's fourth-largest commercial bank.
That Commerzbank scotched the takeover -- it said it could not squeeze enough from a merger to justify the cost -- attests to the difficulty of making almost any deal in Europe's largest, most atomized banking industry.
"We couldn't find profitable reasons to do it," said Ulrich Ramm, Commerzbank's executive vice president. "It was quite clear to us that it would be impossible to meet our medium-term targets for a return."
BHF, he said, would not have brought Commerzbank enough new customers to offset the cost of laying off redundant employees. The job losses, which could have totaled more than half of BHF's staff, had generated stiff opposition from employees and some senior executives.
In the US, Britain and elsewhere, such layoffs are a routine, if not welcome, result of bank mergers. In Germany, with its strict labor laws and strong unions, they can be a deal-breaker.
Layoffs are only one of several hurdles. German banks have been stymied by low profit margins, wobbly balance sheets from bad loans and deteriorating assets, a fragmented market and the dominant role of the government, which owns about half the banks directly or indirectly.
Germany's four biggest commercial banks -- Deutsche Bank, Dresdner Bank, HVB Group and Commerzbank -- account for only 16 percent of the industry's total assets, 14 percent of customer deposits and 13 percent of retail loans, according to the Bundesbank.
"I sometimes say Germany has the largest public-sector banking market behind North Korea," Ramm said.
A few months ago, Frankfurt was crackling with the words that Citigroup might buy Deutsche Bank. Although the two conducted exploratory talks in January, Citigroup moved on to Asia, where the market is growing more quickly.
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