According to financial circles, the institute has bagged the takeover of Degussa Bank.
(Photo: Oldenburgische Landesbank)
Frankfurt The Oldenburgische Landesbank (OLB) is making the next purchase. The institute is taking over Degussa Bank for 220 million euros, the Lower Saxony announced on Wednesday evening, thereby confirming an exclusive report by the Handelsblatt. At the end of 2021, OLB had total assets of EUR 24.6 billion, making it about four times the size of Degussa Bank.
“With the takeover, we are strengthening our Germany-wide presence in the private customer business,” said OLB boss Stefan Barth. “We are taking on 340,000 private customers, which will increase the number of private customers across the group to around one million.” OLB has a strong presence in north-west Germany, but has also been recruiting savers in other parts of the country for some time.
Degussa Bank is what is known as a worksite bank. It operates almost 60 mini-branches on the premises of Dax corporations and large family businesses. Customers can do their banking there during their lunch break, for example.
The institute has granted loans of 4.5 billion euros and private customer deposits of 5 billion euros. “That played an important role in the takeover, since customer deposits have become attractive again for banks since the interest rate turnaround,” Barth told the Handelsblatt.
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Degussa Bank is majority owned by Christian Olearius and Max Warburg. Both have come under financial pressure because of MM Warburg Bank’s involvement in the cum-ex scandal. According to insiders, that was also a motive for the sale of Degussa Bank.
Between 2006 and 2011, Warburg Bank and its fund subsidiary Warburg Invest got involved in tax fund transactions. The bank shareholders must now be responsible for this. Overall, the burdens are likely to amount to several hundred million euros. The Cologne public prosecutor’s office has filed charges against Olearius for serious tax evasion. It is considered likely that he will have to answer in court. Max Warburg is accused. Both protest their innocence.
Degussa Bank is currently still in the red
The purchase price for Degussa Bank corresponds to around 60 percent of the book value of the institute. Other banks are currently valued lower on the stock exchange: Deutsche Bank at 35 percent of its book value, Commerzbank at 37 percent.
From the point of view of OLB boss Barth, Degussa’s higher rating is justified. OLB will pay EUR 220 million and receive capital of EUR 357 million upon completion of the transaction. “We can thus cover far more than our restructuring costs, which we need to achieve our medium-term goals with Degussa.”
Degussa Bank is currently in the red. The cost-to-income ratio is around 110 percent. However, Barth is confident that the institute can be quickly restructured after the takeover.
“A big advantage is that we both work on the same core banking system. This allows us to merge the systems more easily and increase the efficiencies necessary for Degussa Bank to be profitable again soon.”
The prospects for the approximately 600 employees of Degussa Bank are different. “We want to keep the employees in the customer business, in the branches,” emphasizes Barth. In contrast, there are some redundancies in administration and in the back office. “Several jobs are expected to be lost in this area.”
An IPO for OLB is realistic at the earliest in 2023
OLB is owned by the financial investors Apollo and Grovepoint and the US pension fund TRS. The institute has already taken over numerous banks in recent years. According to Barth, however, the Degussa purchase is the first acquisition that the institute has made exclusively from its own funds. “We don’t need fresh money from our owners for this.”
The OLB owners want to take the bank public in the future. However, according to insiders, this is not possible before 2023 at the earliest due to the uncertainty on the markets and the slowdown in the economy. The Degussa purchase also indicates that there will be no IPO in the short term.
However, Barth points out that his former employer, Austria’s Bawag Bank, went public in 2017 at a time when it had announced but not yet completed its purchase of Südwestbank. “So a transaction is basically not an obstacle.” In general, however, the decision to go public lies with the owners.
More: Stock market aspirant Oldenburgische Landesbank buys