“I am pleased that we now have found a long term solution for German Retail. The restructuring in Germany is in line with our long term strategy to be the relationship bank – with a universal offering in Sweden and the Baltic countries and a wholesale offering in the Nordic countries and Germany,” says Annika Falkengren.
The transaction encompasses 173 branch offices, 1 million private customers and some 2,000 employees. Closing of the transaction will be around year-end.
“The retail business was acquired more than ten years ago in the midst of the internet era as a platform for developing internet banking and meeting what was then seen as changing savings patterns among German households. This did not materialise and the business has therefore lacked critical scale and profitability within SEB. I am confident that we now have found the best possible home for German Retail,” says Annika Falkengren.
Good solution for German Retail
Despite large efforts to make the business more efficient and develop the customer offering – and despite one of the highest customer rankings in Germany – this has not been enough to reach a satisfactory profitability.
“Our judgement is that Banco Santander is the best fit for the future of the German retail business. It is a global retail bank with more than 13,600 branches around the world. They have a pronounced growth strategy within retail banking and the necessary scale to execute on it. This creates opportunities for German retail, not least for all employees, says Mats Torstendahl, head of SEB’s Retail Banking division.
Germany remains important market for SEB
“We have been present in Germany for nearly 35 years. Going forward we will focus on our Merchant Banking, including Commercial Real Estate, and Wealth Management units – all profitable and growing businesses in Germany,” says Annika Falkengren.
Jan Sinclair, head of SEB in Germany sees large opportunities:
“Our continued business stands on its own merits and in addition, provides value for our corporate clients in the Nordic countries. Germany is not only the largest economy in Europe but also an important trade partner for the Nordic countries. Therefore it is natural that we reinforce and develop our corporate business in Germany in the same way as SEB is doing in the Nordic countries.
Strategic benefits
Banco Santander is paying 555 million euro for the German retail business which net after allocated capital implies a capital gain of 135 million euro. But due to transaction costs amounting to 375 million euro the net result is a cost of 240 million euro before taxes.
“The strategic benefits and the long term financial impact are positive. Key group financial ratios will improve and we will free up capital that will be invested in continued growth in our core areas. This is in line with our more focused strategy for SEB, i.e. focusing on areas where we are or have the possibility to be a leading player. That means we are a universal bank in Sweden and the Baltic countries and a corporate and wholesale bank in the Nordic countries and Germany,” says Annika Falkengren.