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Report: Merger of German lenders DekaBank, Helaba seen as unlikely

A merger between state-owned lenders DekaBank Deutsche Girozentrale and Landesbank Hessen-Thüringen Girozentrale is seen as an important step toward greater consolidation in the German public bank sector but doubts about the success of the deal are growing, Handelsblatt reported.

DekaBank, which handles the securities trading and asset management business of the savings banks sector, and Helaba, the central institution for the savings banks in the states of Hesse and Thuringia, initiated talks on a potential tie-up earlier in January. However, some of the owners of DekaBank are skeptical about the deal, the newspaper said, citing two sources familiar with the matter. Other people involved in the process also see the transaction as rather unlikely given the misgivings of some of DekaBank's owners, the newspaper said.

Another key barrier for a successful merger is its complexity. While DekaBank is owned entirely by savings banks associations in various German states, the states of Hesse and Thuringia are both shareholders of Helaba, with stakes of 8.1% and 4.05%, respectively.

In case of a merger between the two institutions, the future role, especially of the state of Hesse, needs to be determined, according to the Jan. 16 report. Currently, the two banks are talking about options for a closer cooperation, the German savings banks association DSGV told Handelsblatt.

The DSGV and chiefly the association's president, Helmut Schleweis, has been pushing for the merger as he sees it as a first step toward merging all remaining central institutions for the savings banks into one large bank, similar to the merger of all central cooperative bank institutions into the DZ Bank AG group.

Having one central bank for all savings banks will help improve efficiency and strengthen the whole sector, according to Schleweis. He has been advocating for a mega-state bank in Germany in the wake of the privatization of Hamburg Commercial Bank AG, formerly HSH Nordbank, and the difficult recapitalization process of Norddeutsche Landesbank Girozentrale, dubbed NordLB.

Schleweis was initially calling for a merger between NordLB and one of the other central institutions, so-called landesbanken, such as Helaba or Landesbank Baden-Württemberg, as he was worried that the troubled NordLB group could follow Hamburg Commercial Bank and leave the public banks sector.

There were private investors bidding for NordLB in late 2018 before the bank's owners ultimately agreed on a state-backed rescue package with the support of the DSGV. NordLB is majority-owned by the state of Lower Saxony.