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BUSINESS

Commerzbank speeds Dresdner deal

Reassuring investors that its acquisition of crosstown rival Dresdner Bank wouldn’t be crushed by the financial crisis, Commerzbank on Friday said it would step up the purchase of an additional 40 percent Dresdner Bank stake and pay in cash rather than shares.

Commerzbank speeds Dresdner deal
Dresdner's new home. Photo: DPA

Commerzbank will now shell out €1.4 billion in cash for the remaining minority holding and move up the purchase to January from the final half of 2009. It’s currently working to complete the purchase of an initial 60 percent stake of Dresdner.

The bank in August said it would give insurance behemoth Allianz €1.6 billion in cash as well as its Cominvest retail trading unit and a 30 percent stake in itself in a two-tier buy of Dresdner. But the terms now call for Allianz to be left with €3 billion in cash and just an 18.4 perecent Commerzbank holding in addition to Cominvest.

Commerzbank will also only pay €250 million for bad Dresdner investments it won’t be taking in the deal, down from an earlier-agreed €975 million.

“Amid continued volatile financial markets, this move allows us complete operating flexibility,” said Commerzbank CEO Martin Blessing in a statement.

Investors had been concerned that a collapse of Commerzbank’s shares had put the acquisition in doubt. The stock has tumbled from about €20 at the start of August to a 52-week low Wednesday of €6.55. Investors Friday rejoiced at the announcement, pushing Commerzbank shares up 7.4 percent to €7.39.

By comparison, the benchmark DAX index was mostly unchanged. Allianz shares also leapt Friday, trading 6.5 percent higher at €65.70.

Allianz put Dresdner up for sale earlier this year after trying for seven years to make cross-selling of banking and insurance products profitable. Commerzbank apparently beat out a higher bid from China Development Bank, which would likely have met with resistance from Chancellor Angela Merkel’s government.

The deal is also part of a broader consolidation of Germany’s banking landscape where private lenders have trouble competing with a phalanx of cooperative and government-backed lenders. Deutsche Bank, the country’s biggest bank, is buying Deutsche Postbank in a three-step agreement announced just days after the Commerzbank/Dresdner deal.

BANKING

German online bank N26 shutters US service

German online bank N26 said Thursday it was closing its operation in the United States next year, as regulators in Europe place the "fintech" start-up under increased scrutiny.

The N26 logo on a bank card.
The N26 logo on a bank card. Photo: picture alliance/dpa | Christophe Gateau

N26’s 500,000 customers in the US would be able to use their services until January 11th, 2022, the bank said in a statement, after which it would cease to operate in a market it first entered in 2019.

Instead the Berlin-based operation would “sharpen its focus on its European business”, where it already operates in 24 countries and is exploring expansion into more eastern European markets.

N26 said it would also look to launch new “investment products in the coming year” to sit along side its current account service.

Founded in 2013, N26 offers free, online-only banking services to around seven million clients and is one of Germany’s most high-profile financial technology or “fintech” firms.

In October, the bank raised $900 million from private investors, and announced a plan to hire a further 1,000 employees to reinforce its product development, technology and cybersecurity teams.

READ ALSO: German online bank N26 to create 1,000 jobs

At home, N26 has been in the crosshairs of the German banking watchdog BaFin since 2018 after a local news media investigation found that it was possible to open account with forged IDs.

Earlier in the month, the regulator said it was upping its oversight operations at N26, appointing a special representative to monitor the bank’s progress towards solving issues in “risk management with regard to IT and outsourcing” identified by BaFin.

The regulator also limited the number of new customers N26 could take on to 50,000 a month until the shortcomings were addressed.

N26 was already being monitored by BaFin over failures in the start-up’s anti-money laundering system.

BaFin issued N26 with a 4.25-million-euro ($4.8-million) penalty earlier this year in connection with around 50 “suspicious transactions” the bank failed to report promptly enough.

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