Deutsche Post 'surprised' at BHF bad loans

Deutsche Post has conducted due diligence of ING Group’s German banking unit as speculation grows that the Dutch financial services company is seeking to sell the business.

Postbank, the German postal company’s own financial unit, examined the BHF business several weeks ago, according to people close to the company. However, it was said to be “surprised” at BHF’s rising exposure to bad corporate loans.

Its interest in BHF is said to have cooled. Some observers even expect the talks to break down, although they say Postbank may still be eyeing some parts of the bank’s business.

Postbank and ING declined to comment.

ING took control of BHF in 1999 to spearhead its push into the German market, but last month conceded that the unit’s results were “disappointing”.

The Dutch company has already slimmed down its wholesale banking business and sold stakes in other operations such as Van der Moolen, the specialist broker, in a bid to strengthen its own balance sheet.

Observers have noted signs in recent months that ING has been losing patience with BHF and trying to tighten its grip on the business. Peter Gloystein, divisional chief executive, resigned in August following a “difference of opinion over strategy”.

BHF’s rising bad loan exposure reflects the tide of bankruptcies among mid-sized German companies. The unit, which also has a large private client business, had a corporate loan book of €3.8bn ($3.78bn) at the end of last year.

Loan-loss provisions climbed 32 per cent to €237m in the first nine months. UBS Warburg estimated that charges as a percentage of total loans would rise to 0.7 per cent this year, compared with 0.46 per cent in 2001. ING’s domestic corporate bad loan charge is expected to be just 0.09 per cent this year.

Postbank’s interest in BHF reflects existing ties between the businesses. Wulf Schimmelmann, Postbank chief executive, was a member of the BHF board before joining the German company in 1999.

Postbank acquired a logistics financing business from BHF last year and Mr Schimmelmann said at the time that he would have liked to have bought some other businesses.

Speaking on the sidelines of a Frankfurt press conference, Mr Schimmelmann stressed that Postbank was focused on private client business, raising doubts about his intention to acquire BHF’s corporate lending operation.

Postbank, which with 10m clients is Germany’s largest retail bank, has performed relatively well in the tough conditions facing German banks as rising bad loan charges combine with the weak revenue environment. It has pledged to boost its cross-selling activities and grow in online banking and the financing of logistics and service companies.

ING’s experience highlights the mixed fortunes of overseas banks in Germany. Sweden’s SEB acquired BfG in 1999 and has successfully used the franchise to export its online banking service.