Germany's savings banks association (The DSGV) has emerged as the leading bidder for Landesbank Berlin, highlighting its strong interest in preventing public banks from falling into the hands of the private sector.
The DSGV, which represents the country's several hundred public sector banks, submitted the highest offer, worth _4bn ($5.3bn), for Landesbank Berlin in the first bidding round, according to people close to the auction.
The association declined to comment. An 81 per cent stake in Landesbank Berlin is being sold by the city of Berlin as part of conditions set by the European Commission after the city bailed out the bank from the brink of bankruptcy in 2001.
The auction is being closely watched in the financial sector because the bank owns the savings bank Berliner Sparkasse. This is the first real opportunity for private banks to enter the previously protected savings banks sector.
It could mark the beginning of the end of Germany's traditional three-pillar system of private, public and co-operative banks.
The DSGV lobbied that private banks should not be allowed to buy Landesbank Berlin with the Sparkasse name intact. But the EU ruled that any buyer would be entitled to use the name. The association's high first-round bid underlines how important control of the Sparkasse - one of the best-known brands in Germany - is to the DSGV.
But the association could still face tough competition from commercial banks and private equity companies, as well as some of its own members such as LBBW and WestLB, two public Landesbanken.
In the private sector, Commerzbank and HVB, the Munich-based bank owned by Italy's UniCredit, are both considering buying Berliner Sparkasse. With its 2m retail customers, the savings bank would boost their domestic retail businesses.
LBBW and WestLB want to grow ahead of expected consolidation in their sector. Berlin received nine non-binding indicative bids for its stake. The city is expected to narrow that down soon to about six prospective bidders, which will conduct due diligence before deciding on a binding offer.
Source: The Financial Times Ltd. Date: 09.04.2007 [ID: 8]