(Bloomberg) -- Germany's public-sector savings banks have initiated the sale of their commercial real estate lender Berlin Hyp AG in what would be the biggest banking deal in Europe's biggest economy this year, people familiar with the matter said.
The savings banks association DSGV has mandated Pricewaterhouse Coopers to collect bids which may be valued at at least 500 million euros ($590 million), the people said, asking not to be identified as the matter is private. Binding offers are due in October, they said.
Landesbanks including Helaba as well as LBBW, which are jointly owned by federal states and local savings banks, have handed in preliminary bids, while private banks such as Deutsche Bank AG or private equity funds haven't been invited as DSGV aims for Berlin Hyp to remain within the savings banks sector, the people said. DSGV might also decide to run Berlin Hyp as a stand-alone lender, one of the people said.
The German savings banks decided at the end of June to explore winding down the holding company for Berlin Hyp and regional lender Berliner Sparkasse, a spokesman for DSGV said. The goal is to “strengthen the respective economic and strategic independence” of the businesses, he added, while declining to comment further.
Spokespeople for Helaba and LBBW declined to comment, as did a spokeswoman for Berlin Hyp who referred questions to DSGV.
Low Profitability
German banking M&A has been largely muted since talks between Deutsche Bank and Commerzbank AG fell apart two years ago, despite low profitability being an issue for many lenders. A fragmented market, tough competition and consumers used to receiving many basic services for free have squeezed margins for years. The negative interest rates set by European Central Bank have added yet another challenge.
A sale of Berlin Hyp, if successful, would mark a revival of efforts by Germany's public sector banks to consolidate. Merger talks between Helaba and asset manager DekaBank, which is wholly owned by the the country's savings banks, were put on hold in early 2020 as the lenders had to deal with the fallout from the pandemic.
The effort to consolidate public-sector lenders is being driven by Helmut Schleweis, the Berlin-based head of DSGV. He has urged mergers to cut risk after Landesbank NordLB had to be rescued with a 3.6 billion euros aid package in 2019. He faces resistance from some of the Landesbanks themselves, which have vigorously defended their independence and their prestigious position in their respective regions.
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