The German savings banks association, DSGV, is urging state-owned institutions Landesbank Hessen-Thüringen Girozentrale and DekaBank Deutsche Girozentrale to start talks that could lead to a potential merger, Manager Magazin reported Oct. 8.
Presidents of regional savings bank associations and representatives of German states, which hold stakes in the two institutions, agreed to begin negotiations, according to the report. Helaba and Deka should explore options ranging from closer cooperation to a merger, according to a DSGV spokeswoman.
A merger will create the largest state-owned institution in Germany, with €263.4 billion in total assets, based on end-2018 figures for Helaba and Dekabank.
Super state bank
The current decision rekindles an earlier idea of DSGV's president Helmut Schleweis for the creation of a super state bank to act as the central institution for all savings banks in Germany. Currently, landesbanken such as Helaba are playing that role for savings banks, known as Sparkassen, on a state-by-state level. Savings banks are often owners of their landesbanken.
Schleweis proposed the gradual merger of all remaining landesbanken as a way to drive consolidation in the German public banking sector, increase efficiency, and also strengthen DSGV members. His proposal came following the privatization of Hamburg Commercial Bank AG, formerly known as HSH Nordbank. HSH was the first German state bank to be fully privatized.
Since then, reports about potential landesbank mergers, including a potential tie-up between Dekabank and Helaba, has often emerged. However, a landesbanken merger is generally seen as difficult to complete because of the potential conflict of interest between the various stakeholders. Earlier this year, Landesbank Baden-Württemberg's CEO Rainer Neske reportedly rejected the idea of a super state bank, saying there are no discernible benefits for the bank's owners, among which are the states of Baden-Württemberg and the city of Stuttgart. Both have rejected the plan. LBBW is currently the largest landesbank with €241.2 billion in total assets at 2018-end.
Far from certain
The road to a merger between Helaba and Dekabank will be rocky given the potential clash of ownership interests, according to Manager Magazin.
Helaba is owned by regional savings banks but the states of Hesse and Thuringia also have stakes in the bank, of 8.1% and 4.05%, respectively. Dekabank, owned by regional savings banks, acts as an investment service provider and asset manager for the savings banks sector in Germany.
