Cerberus Capital Management is seeking a presence in the banking market of Europe’s biggest economy.
Through its Austrian lender Bawag PSK Bank, the US private equity fund is in talks to acquire Suedwestbank, a small commercial bank in Germany’s prosperous southwest, according to a statement on Wednesday. Bawag plans to use that base to expand in the country, chief executive officer Anas Abuzaakouk said in a telephone interview from Vienna.
“We’re looking at multiple things,” Abuzaakouk said. “We think it’s going to be a great platform and foundation for our German expansion — both organically and inorganically.”
Cerberus bought Bawag after off-balance sheet losses almost toppled the bank in 2006. While the original exit plans were upended when the financial crisis hit two years later, the firm turned Bawag into Austria’s most profitable bank through cost cuts and cleaning up its books. GoldenTree Asset Management has since acquired a 40% stake.
Suedwestbank, founded in Stuttgart, Germany, was bought by Andreas and Thomas Struengmann’s Santo Holding in 2004. After a capital injection by Santo four years ago, the bank has boosted its total assets to €7.4bn ($8.3bn) at the end of 2016, according to its website.
After the acquisition, Bawag will look at further targets in Germany, as well as German-speaking Switzerland and Austria, he said. The company feels most comfortable buying smaller banks with total assets of up to €10bn, he said, because they’re easier to analyse and to integrate.
Challenges await, though, in Europe’s biggest economy. The banking industry in Germany is sitting on hordes of deposits that increase the pain of negative interest rates, while strict labour laws bloat costs and intense competition eats into earnings. The market is also fragmented because of the high market shares of the country’s more than 1,400 savings and cooperative banks.
Bawag last year bought Start Bausparkasse and Immo-Bank from a group of Austrian cooperative lenders, as well as Six Group’s Austrian card-issuing business.
Suedwestbank’s own funds amounted to €720mn at the end of 2016, according to the bank’s website. Pretax profit in 2016 was €78.8mn, 23% more than a year earlier.