A recent agreement between Landesbank Hessen-Thüringen Girozentrale, or Helaba, and fellow German federal state bank Landesbank Baden-Württemberg, or LBBW, does not necessarily have wider implications for the whole sector, according to Helaba CEO Thomas Gross.
The deal will see the two companies swap and bundle savings bank service operations and is focused on improving efficiency and quality of service. Germany's landesbanken are owned by savings banks, as well as local governments, and help them arrange larger loans and manage capital market investments.
Helaba swung to a first-half consolidated net profit of €201 million from a prior-year loss of €185 million and reported year-over-year increases in both its net interest and net fee and commission income. The improved performance was driven by "strong growth" across all of the group's business segments as it recovered from negative valuation effects suffered a year ago due to pandemic-related market disruptions.
The positive performance trend is expected to continue in the second half of 2021, with Helaba saying it is targeting a full-year result well above the 2020 level.
Consolidation talk
A merger between all remaining federal state banks in Germany has been actively discussed by sector and state representatives over the past few years. Members of the federal parliament recently called for greater consolidation to avoid systemic risks in the sector. Helaba became part of the all-in merger discussion in 2019 when it started merger talks with DekaBank Deutsche Girozentrale, which handles the securities trading and asset management business of the German savings banks. The talks were postponed amid the onset of COVID-19 in early 2020.
Apart from expectations of further M&A between landesbanken, cooperation agreements like Helaba's recent deal with LBBW and LBBW's acquisition of peer Bayerische Landesbank's hedging business in June 2020 have prompted questions about potential greater consolidation of federal state bank services.
LBBW and BayernLB themselves said the deal would drive more consolidation in the corporate banking services of Sparkassen-Finanzgruppe GmbH & Co. KG, the umbrella organization for the German public banking sector.
Helaba's viewpoint
Gross, however, did not want to relate Helaba's deal with LBBW to anything beyond plans for greater efficiency at the two institutions and also declined to comment on potential similar cooperation agreements with other peer institutions in the future. As in the past, Helaba will announce further cooperation opportunities only after it has a concrete plan and a memorandum of understanding, like the one with LBBW, or another contract has been signed, Gross said.
LBBW CEO Rainer Neske previously said his bank is not interested in merging with peer institutions.
