German economy groans, but Commerzbank 15 years ago, the “Cinderella” of the national financial sector, as presented by moderator Wolfram Weimer at the Ludwig Erhard summit on Lake Tegernsee, has taken a turn: “Is there more to come, Mr. Knof?”
Manfred Knof, director of the financial institution that has risen again after a deep fall, assured that the company, naturally, believes in its own strategy and in its own shares, which were trading at a good three euros when he was appointed in September 2020 and since then it has quadrupled its value. Which doesn't have to be “the end of the journey,” Knof said. “We have a great plan.”
Clear model instead of volatility
Clear question, clear answer in the summit's financial talk. Knof, a former German banker, also believes that the cause of the change was a decision that hurt him: the rapid dismissal of 10,000 employees, “one in three in Germany”, and the closure of 600 of the 1,000 branches. Plus a clear business model instead of the previous infamous volatility. Some people still remember the unfortunate timing of the Dresdner Bank acquisition, just days before Lehman Brothers collapsed in the United States and the financial crisis began.
Today Commerzbank is once again the credit institution for “export-oriented German medium-sized companies”, which is why it was founded around 150 years ago, says Knof. “30 percent of the entire German export industry goes through our books.” The “small but beautiful” strategy has been adopted; at the moment these are not very large acquisitions. Each system must “add value, but also be suitable for our customers.”
Is the reprivatization of Commerzbank planned?
During the 2009 financial crisis, the state acquired 25 percent of the collapsed Commerzbank and currently still owns 16 percent of the shares. Editor Weimer wanted to know if FDP Finance Minister Christian Lindner was now thinking about a full reprivatization. For the moment, Knof believes, calm and self-assured, the federal government, which does not interfere in his business conduct, probably has other issues on the priority list. On the other hand, why not? “Commerzbank is strong enough to operate independently.” Especially because he believes in the “power of medium-sized businesses.”
At the same time, the head of Commerzbank sees a great need for political reforms. It is necessary to address the “main structural problems of energy, digitalization and educational infrastructure.” After all, for the first time he sees hope in the capital market union, which has been discussed for a long time, because “the German and French sides are in talks.”
Weimer finally said that he had heard rumors that Knof, who was a successful bank director and at the same time a prominent political figure, could become finance minister under CDU Chancellor Friedrich Merz. What's wrong with that? Knof laughed, a little embarrassed: “We don't have to go that far,” but at the same time argued that “the mix between business, politics and permeability” should be more common in Germany, as well as in the United States and France.
The banking industry in transition?
So there are already enough topics for the banking world. Is it even in transition? Immediately afterwards, four high-profile bankers discussed this issue. However, the debate focused more on which banks must prevail in the face of the current upheavals, from the coronavirus to Putin's war against Ukraine and the Hamas terrorist attack against Israel, which threatens to become a conflagration due to the interference of Iran. In addition to supply chain problems, inflation and high energy costs. This means a large-scale transformation of the entire national economy, said Tobias Vogel, CEO of UBS. Europe, and that presents not only great opportunities but also great challenges. Therefore, he predicts that in the future the capital market will play an even greater role for companies.
Patrick Trutwein, CRO/COO and member of the board of directors at IKB, also sees “a great deal of complexity and uncertainty that our customers also have to face.” This pressure affects investment decisions.
800 billion for transformation – per year!
The compulsion to transform is often treated as a promise of salvation. For this reason, Matthias Voelkel, CEO of the Börse Stuttgart group, put a price on the process. In Europe it is “six, seven or eight hundred billion euros a year,” he said. “It will not be financed by the State, but by the capital market as a whole.”
But the capital market in Germany and Europe is weak and “not as strong as that of the United States.” That is why, says Voelkel, large German companies such as Linde, Biontech and Birkenstock prefer to list in the United States: “Last year we had more than 100 IPOs in the United States, three in Germany and the Capital Markets Union, which was formerly Commerzbank “. Chief Knof's hopes were “only on paper.”
“More incentives and less regulation” are needed to attract wealthy clients, but also average investors, to the capital market, said Vogel, head of UBS Europe. Until now, it has been almost impossible for ordinary investors to engage in, for example, private equity. That has to change. “Because of the size of the economy, we would have the deepest and broadest capital market, and that is an opportunity we should take advantage of.”
Interruptions? There have always been wars!
The term disruption is often used to explain when things go differently than planned. Carsten Klude, chief economist at private bank MM Warburg, called for more calm. “There were always changes,” he said. “There have always been wars, there have always been pandemics,” so it cannot be said that “2024 will be a particularly disturbing year.” But what remains “are the clients' expectations of the bank or the asset manager, that remains!”
Klude believes that in Germany things are “slowly improving” and that there is “at least a mini-growth.” The ECB has already signaled interest rate cuts, saying there will be “perhaps three this year” starting in June. He recommended that investors be less risk averse and, of course, put virtual blinders on their horses so they don't always look at possible dangers.
Or you have to consciously counteract the risks. Voelkel spoke about current meetings with businessmen in Israel. “Many families have been directly affected by Hamas terrorism, but there is still no change in the vision for the future.” Real estate prices in the northern and southern regions where Hezbollah and Hamas rockets fell did not drop as expected: “What is happening is the opposite.”
Which shows that there is no obligation to lose heart, even in times of crisis.
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