Why is financial investor Cerberus dropping the banks?

Status: 11.01.2022 1:22 p.m.

The exit of the financial investor Cerberus from Deutsche Bank and Commerzbank comes as a surprise. Why are the Americans in such a hurry? And is a merger of the two big banks finally off the table?

By Detlev Landmesser, tagesschau.de

The timing is surprising: there is currently hope in the banking towers of Europe because the approaching turnaround in interest rates promises better business. And yet Cerberus seems determined to part with its stakes in Deutsche Bank and Commerzbank.

Yesterday evening the American hedge fund sold around 21 million Deutsche Bank shares and 25.3 million Commerzbank shares to other professional investors within a few hours. That corresponds to one third of the current shares in Cerberus. The New York investor received around 450 million euros.

Cerberus now holds just under two percent in Deutsche Bank and just under three percent in Commerzbank. But the Americans apparently also want to get rid of these shares quickly. According to the bank commissioned with the sale, Cerberus only sets itself a period of 45 days, during which it does not want to throw any further blocks of shares on the market. Holding periods of at least three months are customary.

About three percent loss in value

Cerberus cannot have made any profits with the package sale, even if the two bank stocks each gained around a quarter in value last year. At the time of the entry a good four years ago, Deutsche Bank shares cost around 15 euros. The 21 million shares were placed yesterday at 12.06 euros. Some of the Commerzbank papers were worth significantly more in 2017. The Cerberus shares were sold for EUR 7.50 each. These are discounts of around three percent each.

Why are the Americans in such a hurry? Right now, the end of the years of low interest rates is in sight. Rising interest rates open up better business opportunities for institutions. In particular, you can expand the interest margin, i.e. the difference between debit and credit interest, and thus possibly finally generate profits again in your classic business.

An age-old speculation

But for Cerberus it was about something else. When the financial investor invested in the two leading German financial institutions almost simultaneously in 2017, age-old speculation was awakened again: What if the two get together and Germany can finally play again in the international banking concert? According to media reports, Cerberus also recently supported the federal government’s efforts.

In the usual fashion, the hedge fund had also put a lot of pressure on top management. In the summer of 2020, Commerzbank plunged into a leadership crisis when CEO Martin Zielke and Supervisory Board chairman Stefan Schmittmann threw in the towel in a dispute with Cerberus over a tougher restructuring course. Manfred Knof succeeded Zielke at the beginning of 2021.

But the talks with Deutsche Bank failed again after a short time. As the “Handelsblatt” wrote, Cerberus had considered taking over the state’s share of a good 15 percent in Commerzbank in the fall.

Fusion perspective disappears

The exit could therefore have something to do with the fact that the Americans no longer consider a merger to be feasible. It is possible that there have recently been signals from the new federal government that it will no longer support the transaction, according to Thomas Hartmann-Wendels, banking expert at the University of Cologne.

“Without a merger perspective, however, the commitment of Cerberus makes no sense, since Cerberus’ investments are not geared towards profiting from long-term business development, but rather earning from increases in value that are brought about by massive restructuring,” explains the university professor.

Does this mean that the merger of Deutsche Bank and Commerzbank is finally off the table? “I don’t want to say that,” said Hartmann-Wendels. “But certainly for the foreseeable future.”


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