Expert Perspective

　　

The two largest banks in Germany, Deutsche Bank and Commerzbank, are planning to merge. Prior to this, Deutsche Bank had acquired Deutsche Post Bank. If this merger is successful, the new bank's total assets will reach 100 billion euros (1 euro is about 8 yuan), making it the third largest bank in Europe.

 　 Since the beginning of this year, European banking mergers and acquisitions have been very active. The media have reported on the merger and acquisition intentions of Standard Chartered Bank and Barclays Bank, Societe Generale and UniCredit. The merger between German banks is nothing but a manifestation of the ascendant integration of the European banking industry.

 　 This characteristic of the European banking industry is largely influenced by several factors. First of all, after the 2008 international financial crisis, affected by the low interest rate and even negative interest rate environment in the European market, the banking industry performed poorly, and the net profit of large banks declined, and even suffered serious losses. It is necessary to integrate forces and stay together for warmth.

 　 Secondly, the European banking industry has a low degree of concentration and is relatively fragmented. As of the end of 2016, the number of EU national banks was approximately 6,600. European Central Bank President Draghi once pointed out that excessive competition in the banking industry is one of the main reasons for the low profitability of the European banking industry. Noy, chairman of the European Central Bank’s Supervisory Committee, believes that the European banking industry is still highly fragmented and some banks will be squeezed out of the market. In addition, the European Union is promoting the establishment of a capital market alliance, the European market is strengthening unified supervision and integration, and the banking industry also needs timely adjustments.

 　 For Deutsche Bank itself, it is imperative to enhance its competitiveness through mergers and acquisitions. The bank has suffered continuous losses in recent years, with a loss of up to 497 million euros last year. Investor confidence has been frustrated and stock prices have fallen. It is urgent to restore market confidence. At the same time, the German banking industry's net interest margin (referring to the ratio of the bank's net interest income to all interest-earning assets, which is an indicator of bank profitability) is lower than the European average, and it is more difficult to make a profit for diversified operations. Deutsche Bank and Commerzbank are complementary in business. The former mainly serves large domestic listed companies, while the latter has many small and medium-sized enterprises and family business customers. If Deutsche Bank does not make a move, German Commerzbank may be acquired by large banks in other European countries, which is even more detrimental to Deutsche Bank.

 　 At present, there are many favorable factors in this merger case. Regulators and market participants have a certain consensus on Deutsche Bank’s expansion of scale and profitability. The previous acquisition of Post Bank’s business integration has also accumulated experience in this case. However, there are also many thorny issues, such as persuading the bank’s shareholders to accept the current price, properly resolving the issue of layoffs after the merger, and gaining support from regulators.

 　 If the merger of these two banks succeeds, it will have a series of impacts on European and international financial markets, play a demonstrative and promote role in the merger of other European banks, and may promote some large European banks to conclude mergers and acquisitions.

    Forced to usher in a wave of mergers and acquisitions?

 After the collapse of the Turkish lira caused European banks to face Turkish credit exposure risks, since the 2008 financial crisis, it is possible that the European banking industry has not yet fully recovered. Several major EU member states have been slow to implement restructuring or dispose of non-performing loans.

 Everyone thinks that now is the best time to talk about this topic, and everyone seems to think that Europe needs to cut some banks.

 The European Central Bank is currently leading a banking union project to make Europe's bloated financial industry better able to withstand shocks.

 Standard Chartered Bank Group President Jose Vinal once told CNBC that the European Central Bank's task as a financial regulator is to speed up integration.

 After the establishment of the banking union, many affairs will undergo many changes. The European Central Bank will become the main body of banking supervision in the European region and will adopt stronger measures.

 Vinals also pointed out that in order to make this alliance work well, cross-border mergers and acquisitions have also become very important for banks. These have never happened before, but to a certain extent, they are healthy for the development of the banking industry.

 Rabobank CEO Ralph Hamers said that although mergers and acquisitions will occur in the integration of the banking industry in Europe, regulators need to further relax cross-border rules to accelerate this integration.

 The actual benefit after the relaxation is in terms of cost. Capital is not free to move and liquidity is not. Therefore, in order to achieve cross-border mergers and acquisitions, some measures may be needed to make this type of behavior more attractive.

 Jose Maria Roldan, CEO and Chairman of the Spanish Banking Association, believes that Spain has gone further than other European countries on the road of integrating the banking industry. The current number of banks in Spain has shrunk from 45 in 2008 to 18.

 According to the news given by the European Central Bank, if the current situation continues, the pressure on the profitability of the banking industry will continue. This is due to the rise of competition in digital transformation and financial technology, and the pace of normalization of the European Bank’s monetary policy is slower than that. Previously.

 If the current bank cannot ensure the ability to make a profit, it will have to consider mergers and acquisitions as a possible option.

 German senior financial regulator Felix Hufeld, President of Bafin, said that in fact, the German banking industry has begun to integrate for many years. Between 25 and 40 or 50 banks, those who go bankrupt due to anything are taking mergers and acquisitions. .

 Wolfgang Fink, the CEO of Goldman Sachs Germany and Austria, said that although the long-term integration of the financial industry in Europe is necessary to build a strong banking industry, not many have fallen to the level of mergers and acquisitions. At present, most of them are still focusing on how to reform. Technology drives the growth of profits and marginal revenue. Before integration, all of the above can be considered clearly.