German Banks Continue Slide Into Crisis
July 26, 2002
At the end of last year, the main players in the German banking world - Commerzbank, Deutsche, Dresdner and HypoVereinsbank AG - released the grim news that more than 27,000 employees would lose their jobs in a bid to save the companies from potential ruin.
HypoVereinsbank announces first-ever operating loss
On Friday, further bad news for bankers surfaced as HypoVereinsbank AG announced the first operating loss in its history and news broke of the planned closure of 21 branches of Sparkasse Berlin.
HypoVereinsbank showed the true extent of the current weakness of the capital markets by presenting an operating loss, which would have been accompanied by a net loss had it not been for exceptional gains.
In its half-yearly report, HypoVereinsbank, the second largest in Germany, recorded an operating loss of 89 million euros ($89.4 million) after profits of 330 million in the first quarter and 286 million in the second quarter of 2002.
HypoVereinsbank’s chief executive, Albrecht Schmidt, described the result as 'challenging' and indicated that the bank would probably have to revise down its full-year forecasts.
Berlin hit by news of proposed banking cull
Sparkasse Berlin added to the general feeling of impending doom in the sector when it announced on Friday that it planned to close 21 of its 178 branches.
Further losses in the city were reported by the Berliner Bank, which said it had made it own plans to close 20 of its banking facilities.
The steady stream of bad tidings is increasing concern regarding the state of Germany's banking health.
Speaking at a joint presentation with Allianz chief Henning Schulte-Noelle, Dresdner Bank Chairman Bernd Fahrholz said of the current climate, "We are dealing with a real crisis. We find ourselves in a very fragile situation."
After taking over the bank last year, industry insiders widely predict that Allianz’s second-quarter figures, due for release on August 14, will bear the scars of the troubles Dresdner is currently experiencing.
Big names shed workforce and report losses
Very few institutions seem to be immune from the downward trend. Commerzbank, the country's third biggest listed bank, has made a number of sweeping job cuts while Deutsche Bank recently announced a restructuring charge of about 265 million euros to be booked in the second quarter of 2002.
As a result of the restructuring, a total of approximately 1,970 staff, across all grades in the Deutsche Bank's offices around the world, will be affected. The plan will be carried out over the next 12 months.
Since the beginning of 2001, Deutsche Bank has announced headcount reductions that affect approximately 13,000 employees within the group.
This does not include the redundancy of about 1,500 employees related to the bank's acquisition of Zurich Scudder Investments.