German Deutsche Post to float Postbank
Deutsche Post has revealed its plans to float its Postbank subsidiary, which it values at around €5 billion, within the next 12 to 18 months. It intends to retain a slight majority of just one share over a 50% stake and to use the €2.5 billion proceeds to reduce its debt and plug gaps in its European postal services and growing global logistics business.
Deutsche Postbank is Germany's largest retail bank with 10 million customers, 18 million savings accounts and 4.5 million current accounts. It also has around 400,000 corporate customers.
Utilising post office branches, it has the largest physical distribution network–comprising 12,667 branches–of any German financial services provider.
It also claims to be "the leading multi-channel bank in the German market," with 10 percent of its customer base banking online and around 280,000 brokerage accounts.
While Postbank is Germany's thirteenth-largest bank ranked by assets, according to The Banker magazine, it is the eighth most profitable, earning a 14.8 percent return on equity (ROE) in 2002.
Strong retail focus
Unlike many of its German peers, who are now looking to consumer banking to compensate for losses incurred in wholesale and investment banking, Postbank's focus has long been on the retail segment.
What this means in practice, said Postbank in a statement, is that "the company suffers much less from losses in the securities business than competitors … (it) does not need to make large depreciations for corporate loans and does not need to compensate for losses from the investment banking business."
Last year, Postbank's operating profits rose by 19 percent to 681 million (euro), while its cost-income ratio fell from around 82 percent to 78 percent, trends widely attributed to Postbank head Wulf von Schimmelmann.
According to the chairman of Deutsche Post, Dr Klaus Zumwinkel, the IPO is most likely to happen in the autumn of 2004. Postbank is an attractive asset and is likely to generate interest from both domestic and international investors, commented an analyst with Germany's Metzler Bank.
Although Postbank offers savings and current accounts, mortgages, insurance and brokerage via multiple distribution channels, analysts say that it may need to refresh its product range and staid image, if it is to continue to compete effectively in the consumer banking market–the new bright light in Germany's financial services sector.
After losing to DZ Bank in the bidding war for HVB's consumer credit operation, Norisbank (see EB 217), Postbank has committed to developing its consumer lending business organically.
A London-based analyst said that the quality–rather than the quantity of its customer relationships would be key to its future development in Germany's hotly-competive retail banking marketplace.
Third party clearing services
Postbank also intends to develop other aspects of its banking services and announced earlier this month that it will take on the back-office clearing functions of Deutsche Bank and Dresdner Bank from the beginning of 2004, a transaction described by von Schimmelmann as "an important component of the planned IPO."
As from next year it plans to handle 5.3 billion transactions annually including 1.7 million from Deutsche Bank and 900 million from Dresdner Bank. Building on these two contracts, it plans to develop its back-office clearing services to other banks.
Deutsche Post plans to use half of the estimated 2.5 billion (euro) proceeds from the IPO to reduce its 2.2 billion (euro) debt pile. Earlier this year Standard & Poor's downgraded its long term rating from A+ to A, in response to concerns over its pensions deficit. It is targeting an AA rating.
The other half will fund an acquisitions spree. In anticipation of losing its letter monopoly, which currently accounts for around three quarters of its profits, it plans to continue its diversification in European postal and logistics services.
Denmark and Austria are thought to be likely targets, given the impending privatisation of their postal services.
