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Euro Financial Media Reports On German Bank Consolidation

The following opinion piece is issued by Euro Financial Media Editor Gene Pettit, affirming Deustche awakens to a consolidated German banking climate

Deustche is living in new world with the Commerzbank and Dresdner merger, says Gene Pettit, Euro Media editor.

According to Pettit, in the largest German banking merger in history, Commerzbank - the third largest bank in Germany, has reached an agreement with Allianz to buy its banking subsidiary, Dresdner Bank - Germany's second largest, beating out an alleged better bid from state-owned China Development Bank (CDB). "This is an historic merger with wide-reaching implications for the German and European banking sectors. This merger is about German banking consolidation and marks a change in policy from expansionism to consolidation."

He also comments on IKB, a smaller, less well-known bank, being acquired by a American private equity firm, with much derision in German press and German politics. "We have seen this week a willingness of Deustche and others to participate in the American managed asset markets. It was also fine in 2005 for an Italian bank, unaccredited, to acquire the combined 4th and 5th largest German banks' HVB, despite German condescension toward Germany. But, it is clearly not fine for a state-owned Chinese bank to acquire a venerated German financial institution."

Pettit suggests that leaves the Frankfurt-based triumvirate of Deutsche Bank, Commerzbank and Dresdner Bank to pick up the slack. However, the fact that Allianz decided to go with Commerzbank's offer over the CDB offer is related not only to economic nationalism but also to a desire by Commerz and Dresdner to pull back from the internationalism that has burned many a German bank - especially investment banking.

"In five years time, Deutsche Bank may be the only German bank left with a bulge-bracket international banking presence. What this means for the profitability of German banks is unclear," stated Pettit.

Deutsche Bank's CEO is warning about bond insurer downgrades having catastrophic consequences, on par with the subprime crisis seem to have been headed off by the American bailout. This recovery has opened the door for funding opportunities for certain American-based companies which have international interests.

Deutsche Bank executives confirmed a report that they are considering several funding scenarios with Chicago-based company Argent Asset Management Inc. and their bond program. This was confirmed by Ronald Morgan CEO of Argent Asset and managing partner of Argent Securities LLC of Florida who states that this consolidation has opened the door for the more structured and protected programs.

European Central Bank President Jean-Claude Trichet rejected Ackermann's characterization of the potential fallout from bond insurer downgrades.

"I certainly would not mention anything like waves of tsunami or any other mention of that sort," Trichet said at a press conference in Frankfurt. "The fact that this correction continues along various markets is not something which should surprise us - it's an ongoing process."

Pettit believes that while the Commerzbank-Dresdner Bank merger will ultimately be a net benefit for the German banking sector, it is another sign that economic nationalism is on the rise globally. "It also could be the final nail in the coffin for German international banking expansion and giant financial supermarkets," he added.
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   Mr. Gene Pettit
   Financial Editor
   Euro Media
   London,    W2j 6AE
   United Kingdom
   +442032863022 (phone)
   eurofinancialmedia@yahoo.com