S&P downgrades Commerzbank’s credit rating

Deutsche Bank and Commerzbank

The rating agency warns of a significant deterioration in results.

(Photo: dpa)

Frankfurt The rating agency Standard & Poor’s (S&P) has given it a thumbs-up because of the economic impact of the corona crisis at Commerzbank, Deutsche Bank and other German financial institutions. At Commerzbank, S&P downgraded the credit rating by one grade to “BBB +”, the outlook remains “negative”, as the credit rating officers announced on Thursday.

At Deutsche Bank, S&P confirmed the rating of the creditworthiness with “BBB +”, but lowered the outlook to “negative” from “stable”. While the creditworthiness guards doubt that Commerzbank can implement its new strategy “Commerzbank 5.0”, including the planned sale of the Polish subsidiary mBank as planned, they see the restructuring of Deutsche Bank basically on track. Commerzbank and Deutsche Bank declined to comment.

With “BBB +” the credit ratings of the two largest German private banks are still three levels above the junk level. A negative outlook means that the credit rating is in danger of being lowered.

S&P warns that even if the economy begins to recover in the third quarter, all banks will see a significant deterioration in results, credit quality and, in some cases, capital resources. The risks that the economy will recover later and the situation will worsen are considerable.

At the Sparkassen-Finanzgruppe Hessen-Thüringen, which includes Landesbank Hessen-Thüringen (Helaba), S&P confirmed the credit rating with “A”, but lowered the outlook to “negative” from “stable” due to the corona crisis.

At the leasing provider Grenke The rating with “BBB +” also remained stable, here too the outlook was reduced to “negative” from “stable”. At Deutsche Pfandbriefbank (pbb), S&P left both the credit rating “A-” and the outlook “negative”.

More: False incentives, fraud, debts – the side effects of the corona crisis.


Customers remain loyal – almost no cash outflows in March

Frankfurt While investors in Europe fled from investment funds with the outbreak of the corona crisis, Dekabank’s business has remained almost stable. Georg Stocker, the new chief executive of the savings bank fund service provider, said on Tuesday: “Looking at sales shows that customers have reacted very prudently so far.” In March there were almost no net outflows overall, Stocker continued. This applies to both private and institutional investors.

This means that Deka is in a much better position than other asset managers. According to an analysis by the rating agency Morningstar, funds in Europe have recently suffered violent outflows. According to the estimate, based on around 90 percent of all funds offered in Europe, investors sold shares for a good EUR 200 billion net in the crisis month of March.

The final numbers will be even higher. The Morningstar estimate does not include institutional business with large investors.

By contrast, Deka is supported by the business with securities savings plans. In the first twelve weeks of this year, it sold more than 250,000 savings plans. “The now well over five million savings plans are a clearly stabilizing factor for our portfolio,” said Stocker.

The former head of Sparkassenvertrieb, who has been a member of the Deka Executive Board for a long time, moved to the top of the company at the beginning of the year, succeeding Michael Rüdiger. Stocker emphasized that Deka had come through the crisis properly so far. “We are well prepared for any further aggravation of the situation.”

Like other financial institutions, Deka did not want to make a forecast for 2020. The economic consequences of the corona virus are not yet foreseeable, said the Deka boss. Deka is one of the largest asset managers in Germany. At the end of 2019, it was managing a good 310 billion euros. The recent stock market turmoil has reduced the value by around 25 billion euros.

Deka boss defends certificate strategy

Last year, the fund company, which belongs to around 380 German savings banks, earned slightly less than in 2018. The so-called economic result fell from 452 million euros to 434 million euros. The result was burdened by provisions for pensions. The economic result differs in some items from classic earnings indicators, for example in certain interest rate transactions.

In 2019, Deka raised a net 18 billion euros, significantly more than in the previous year. A good 11 billion euros of this came from private customers. They invested five billion euros in certificates and six billion euros in funds. Deka has only been issuing certificates for a few years, but is now the market leader in Germany according to the derivatives association DDV.

Consumer advocates repeatedly warn of risks of loss through certificates and sometimes consider the products to be too complicated. Stocker defended Deka’s approach: According to him, a small part of the certificates due in 2020 are currently in the red. It is about certificates with a volume of 350 million euros, which corresponds to 2.5 percent of the total volume of certificates of 14 billion euros. “The extent to which the nominal amount will still be repaid depends on how the market develops until the due date.”

A large part of the Deka certificates are interest-oriented and not related to the stock market, Stocker explained. Many share certificates, in turn, would have buffers and would run even longer. The certificates were deliberately chosen “so that extreme situations like now have a negative development”.

Dekabank expects the gross domestic product to decline by almost five percent in the current year. A plus is expected for the coming year. Deka chief economist Ulrich Kater said that if this happened, one would be confident that the Dax achieve 11,500 points again next year. The leading German index fell by a good 30 percent within six weeks. It fell below 8500 points at times, but has since recovered somewhat.

The corona crisis also has an impact on the desired consolidation of the top public law institutes: It is on hold for an indefinite period, as savings bank president Helmut Schleweis said just under three weeks ago. He has in mind that ultimately there is only one central institute for the savings banks. The starting point should be a possible merger between Deka and Landesbank Hessen-Thüringen, which is majority owned by savings banks.

The talks between the two Frankfurt institutes only started shortly after the beginning of the year. However, resistance from various sides within the Sparkassen-Finanzgruppe had become clear. There are currently four large Landesbanken: in addition to Helaba, LBBW in Stuttgart, BayernLB in Munich and NordLB in Hanover.

More: Private investors are particularly affected by breakdown series on trading platforms.


Banks are rushing for KfW emergency loans

Frankfurt In the corporate customer business of Commerzbank There has been a state of emergency for a few days. Employees receive more credit requests via email and phone than ever before. Divisional CEO Oliver Haibt says: “The number of inquiries is currently more intensive than at the beginning of the financial crisis in 2008 and 2009.”

Since the past week, Commerzbank has received “a high four-digit number” of financing requests from corporate and entrepreneurial customers in the course of the corona crisis, explains Haibt. A good third of them meet the requirements of the state development bank KfW, which assumes a large part of the credit risk as part of aid programs.

If it is particularly urgent, Commerzbank makes advance payments and pays companies loans within a day. “This is possible because we as the house bank have known the companies and their business models for years.”

The Deutsche Bank, the largest German money house, also registers enormous interest. Already on Monday she had received more than 5,000 inquiries about corona. A bank spokesman said approximately 2,000 customers had made specific requests for KfW’s emergency loans. The first promotional loans have already been approved.

The big rush is also coming to KfW. The state bank itself said that it had received a total of 34 applications with a loan volume of almost two billion euros by Tuesday 12 noon. The lion’s share is accounted for by four large applications with a total volume of EUR 1.985 billion. A spokesman said that 30 applications were loan amounts of up to three million euros. The volume of these applications amounts to 17 million euros.

KfW special loans are intended to dampen the consequences of the corona crisis. Companies have been able to apply for these funds since Monday, and the first emergency loans were granted on Monday. They are part of the rescue package to combat the corona crisis that the federal government has just decided on. In total, it comprises the gigantic sum of 1.2 trillion euros.

This is the corona protective shield for the German economy

The KfW’s new loans are intended for companies that are temporarily experiencing financial difficulties due to the rapid spread of the corona virus and need liquidity to bridge the gap. Working capital and investments can be financed with the loans, which are guaranteed up to 90 percent by the state. KfW normally only promotes investments with its programs and shares the credit risk with the house bank in half. The funds are often discounted. In parallel, there are bridging or liquidity loans from the development banks of the individual federal states.

Full order books

In some cases, corporate customers had already tried to get KfW loans last week. “We already had a full ‘order book’ from the previous week, which will now be given to KfW as soon as possible,” says Stephan Ortolf, head of corporate banking at the top cooperative institute DZ Bank.

Numerous money houses report enormous demand. This also applies to private banks like Hypo-Vereinsbank, HSBC and BNP Paribas and for the German savings banks, which are market leaders in business with medium-sized companies. At Hamburger Sparkasse, for example, one of the largest of the 380 savings banks, several hundred inquiries for immediate funds and promotional loans were received on Monday alone. Other large savings banks report similar figures.

According to the German Savings Banks and Giro Association (DSGV) – similar to Commerzbank ¬, public-law credit institutions have partly made advance payments and paid out promotional loans, although the funds are only made available to KfW later. Deutsche Bank also offers customers bridging financing for loan amounts of up to three million euros, for which KfW leaves the risk assessment of customers to the house banks alone, even before the loans are officially available in April.

Not only is there a great demand for aid loans, there is also a great need for information about Corona. Deutsche Bank has set up a Corona Helpdesk that answers questions from customer advisors across the board – from questions about new bankruptcy law, short-time work benefits to emergency loans. The DSGV also registered “a very high volume of information requests and advice needs of affected companies” immediately after the start of the new funding programs.

Banks praise the form of aid: “The KfW programs are very flexible. They are strongly oriented towards the 2008 programs, but are being handled even more pragmatically, ”says Andreas Voglis, co-head of corporate customers at the HSBC money house in Düsseldorf, with a view to government aid during the financial crisis a good ten years ago.

How quickly companies get a KfW loan also depends on the size of the desired loan. With sums between three and ten million euros, the development bank checks faster than usual. According to financial circles, KfW endeavors to process a maximum of five working days.

In order to be able to help quickly, Commerzbank has set up an internal special fund with a volume of EUR 700 million in addition to the KfW programs. “We use this liquidity to pay out loans directly when necessary,” reports Jan Rolin, who is responsible for larger companies as the divisional board member.

There is a need for this. “There were already a handful of companies where the situation was so serious that we decided within a day and paid the loans immediately,” says Rolin. Most inquiries come from small companies and medium-sized companies with a turnover of between 15 and 500 million euros. Large corporations, on the other hand, have not yet applied for KfW loans.

Difficult considerations for banks

Observers are confident. Markus Berg, partner in the consultancy Berg Lund & Company and expert for regional banks, said: “The Sparkassen-Finanzgruppe and the cooperative financial group are very determined. As far as I can see, everyone in the two groups is pulling together – and at high speed. ”

Nevertheless, according to Berg, the money houses are sometimes faced with difficult considerations, even if they only take ten or 20 percent of the risk with the new KfW loans. “There are business models where it was questionable whether they were sustainable even before the crisis,” he says. “In such cases, the banks will usually choose not to finance it with KfW loans. Only grants can help the companies here. “

Handelsblatt Morning Briefing - Corona Spezial

Commerzbank also makes this clear: “Of course, as a bank we have to carry out an individual risk assessment for financing inquiries and decide whether a business model is sustainable,” says corporate client manager Haibt. “We continue to have this responsibility as a bank.”

In addition, there are still unanswered questions about the cases in which KfW aid is effective. This applies, for example, to companies that have chosen leasing as a financing alternative. Kai Ostermann, head of the market leader Deutsche Leasing, said: It is currently not clear whether and how this will be taken into account in KfW’s aid programs. He demands “to open all programs and measures for leasing”. Deutsche Leasing belongs to the savings banks.

More: Solo self-employed and small businesses should receive up to 15,000 euros in emergency aid