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German Banks, Banking Sector in Motion (August 16, 2005)

Location: Frankfurt
Author: Werner Karsch
Date: Tuesday, August 16, 2005

Banking sector in motion
There is no lack of movement in the banking sector - particularly at pan-European level right now, as shown by the recently announced merger between UniCredito and HypoVereinsbank. At the same time, domestic events have also brought changes affecting the Top 100 bank rankings.

Until 1997, the German banking sector was firmly dominated by the three Frankfurt-based big banks, whose leading rankings remained unchanged for years: Deutsche Bank held the no. 1 spot, followed by Dresdner Bank in 2nd place and Commerzbank in 3rd. The picture only changed in 1998, when Bayerische Vereinsbank and Bayerische Hypotheken- und Wechselbank merged in Munich to become Germany's fourth big bank, HypoVereinsbank (HVB), which currently ranks 3rd among the Top 100 banks.

Big banks undergoing change
The big banks were shaken up again in 2001 by Dresdner Bank's incorporation into the Allianz Group, which sees a combination of banking and insurance as the ideal business model. Dresdner's importance in the German financial marketplace is underlined by the fact that, after ranking 3rd and 4th in the two years before, it moved into 2nd place last year among the Top 100 banks, with an around 10% increase in total assets.

The change in the once seemingly immovable big bank structure in Germany is now taking on a cross-border dimension, as HVB's board has opted for a pan-European strategy. Completion of the planned merger with UniCredito Italiano will create a new force to be reckoned with in the European financial marketplace: The UniCredito/HVB Group will have 28 million customers and over 7,000 branches in 19 countries, with a powerful presence in Bavaria , Austria and northern Italy - one of the wealthiest regions in Europe . With combined total assets of ? 733 billion, it will rank 8th in the European banking league. In comparison, Deutsche Bank ranks 5th, with total assets of ? 840 billion.

But there was another change affecting the big banks: Their number increased to five, since Deutsche Postbank AG ( Bonn ) is now classified as a big bank in the Bundesbank's banking system statistics. Postbank ranks 16th among the Top 100 German banks. The background: On 1st January 1995 , then Federal Minister of Posts and Telecommunications Wolfgang B”tsch privatised Postbank as the successor to the state-owned Deutsche Bundespost Postbank. The climax of the privatisation process was the public flotation on 23rd June, 2004 , which saw Postbank stock soar in price by 40% by the end of the year, well outperforming the DAX - a clear sign of the undertaking's success.

Private bankers: new dimensions
New competitive structures also emerged in the group of private bankers. For example, Sal. Oppenheim jr. & Cie., the old-established private banker in Cologne , entered a new dimension by taking over BHF-Bank from the ING Group. In doing so, it more than doubled it staff to around 3,000, while assets under administration jumped to approx. ? 100 billion and total assets increased by nearly 160% to around ? 25 billion. The fact that Sal. Oppenheim ranks 66th, and not 47th, among the Top 100 banks is because the BHF-Bank takeover took place on 1st January 2005 and could therefore not be taken into account in the 2004 rankings.

A new private banker with an international pedigree was created in Germany by ABN Amro. The Dutch financial group first acquired Delbrck & Co., the almost 300-year-old, Cologne-based private banker, in 2003, then took over Bankhaus Bethmann Maffei. Following contribution of a sizeable volume of assets under administration by ABM Amro, Delbrck Bethmann Maffei AG started operation with total AUA of over ? 1 billion. Although it is, by its own account, one the top five private bankers in Germany , it does not figure among the 100 biggest banks, as its total assets are (still) less than ? 6 billion.

Car finance banks doing well
The direct banks are also demonstrating their growth potential. For instance, Diba Allgemeine Deutsche Direktbank, which is part of the Dutch financial group ING , continued its surge up the rankings. After coming 97th in 2002, Europe 's biggest direct bank jumped to 29th last year. The car finance banks are likewise doing well. Following its growth of the past few years, Volkswagenbank now holds a mid-table ranking (49th). Seven places behind comes another car finance bank: DaimlerChrysler Bank, which has only had a full banking licence for three years.

New Landesbank structures
The Landesbank group, which has dominated places 5 - 20 in the Top 100 banks for many years, is led by Landesbank Baden-Wrttemberg (LBBW), closely followed by Bayerische Landesbank. WestLB, which had already slipped down the Top 100 rankings in 2002 after Landesbank NRW was spun off, is now in 9th place. The balance of power among the Landesbanks changed even more at the beginning of 2005, as LBBW took over Landesbank Rheinland-Pfalz. With combined total assets of over ? 400 billion, LBBW is now Germany 's fifth-largest bank.

The number of savings banks continued to decline in 2004, from 489 to 477. With total assets of ? 31.3 billion, Hamburger Sparkasse remains the biggest savings bank, in 42nd place, followed again by Stadtsparkasse K”ln and Kreissparkasse K”ln in 47th and 48th place respectively. The troubled Frankfurter Sparkasse comes 60th. Finally, the merger between Sparkasse Dresden und Sparkasse Elbtal-Westlausitz created eastern Germany's biggest savings bank, Osts„chsische Sparkasse Dresden.

Werner Karsch, die bank editorial team, Berlin.

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