Job cuts may be deal breaker in German bank merger
Three of Germany's biggest lenders are mulling a merger that would create a new national banking champion but opposition to losing tens of thousands of jobs as a result could quickly render the plan unfeasible.
Commerzbank and Allianz are making a joint approach to buy the country's biggest retail lender, Deutsche Postbank, sources familiar with the matter told Reuters on Friday.
A three-way tie-up involving Allianz's Dresdner Bank unit would be big part of a broad shakeout of the German banking system triggered by a global credit crisis that has prompted massive writedowns and created deep uncertainty about future revenues among the country's lenders.
Berlin would like to see a second big financial player that could hold its own on the international stage next to top lender Deutsche Bank, government sources have said.
With its nearly 15 million customers, Postbank is seen as a major prize in a fragmented banking market that is two-thirds dominated by public-sector and cooperative lenders.
But combining Commerzbank, Dresdner and Postbank could put 20,000 jobs at risk, services trade union Verdi has estimated.
TOUGH AUDIENCE
A top Verdi official and Postbank supervisory board member threatened stiff resistance should Postbank parent Deutsche Post sell its 50 percent stake in the lender.
"If they try it, then we will put pressure on politicians and the management board. That is perfectly clear," Gerd Tausendfreund told Reuters on Friday.
Financial sources said the German government was pushing to get the sales process moving to get a deal done while it still held a veto right over possible partners, a power it can exercise only until the end of the year.
Germany faces a general election next year, which may add pressure to get controversial bank mergers done quickly.
More than a third of Postbank's 21,000 staff members are civil servants, a holdover from its history as a state enterprise, in effect guaranteeing they cannot be sacked.
Finding a solution acceptable to them could prove troublesome for any potential acquirer, as it has for Deutsche Telekom, eroding the cost synergies that many analysts see as the main attraction of a three-way hug among blue-chip banks.
"In a potential merger scenario with another domestic bank there could be up to 570 million euros (USD 890 million) in cost synergies to be extracted over time," said JP Morgan analyst Francesca Tondi in a research note, basing the estimate on the assumption of 2,885 staff cuts at Postbank, or 13 percent of the total.
"We refer to a domestic merger as we believe that only under such a scenario could costs be cut more significantly," she said.
Sal. Oppenheim analyst Carsten Werle said he saw risks to a three-way merger mainly from the revenue side and political resistance to job cuts.
"Despite much more scope for cost-cutting, the net synergy potential in a Commerzbank/Postbank/Dresdner Bank deal would be somewhat smaller" than should Deutsche Bank emerge as the buyer, he said.
Werle saw synergies at 8.27 euros per Postbank share in a three way-deal versus 8.72 euros if Deutsche Bank won a bid.
Aside from these concerns, a merger of Commerzbank, Dresdner Bank's retail operations and Postbank would be highly complex and many observers remain sceptical.
"German banking consolidation has faltered in the past, in particular as culture clashes and opposition to job cuts have scuppered past proposed transactions," said Keefe, Bruyette & Woods in a research note.
"Beyond that, integration of any merger agreed may not in practice prove plain sailing," KBW said.
