Reading about his efforts to merge with four other Landesbanken – WestLB, BayernLB, Nord/LB and SachsenLB – and his failed bid for Landesbank Berlin (LBB), he is portrayed as an over-ambitious and hyperactive bank CEO. Berlin’s government sold LBB to German Sparkassen (state-owned savings banks) for €4.75bn. Mr Jaschinski’s actions have ruffled the feathers of some Landesbanken owners who are not accustomed to such forthrightness. For example, instead of politely declining Mr Jaschinski’s overture, Hartmut Möllring, finance minister of Lower Saxony, which owns 42% of Nord/LB, remarked irritably in June: “We don’t want to merge with LBBW and there will be no further discussion regardless of what Mr Jaschinski says.”
Yet when interviewed by The Banker, Mr Jaschinski, who has a PhD in history, cut an entirely different figure. He is softly spoken and mild mannered, and he is visionary about the future of German finance and what role his bank should play.
He feels strongly that the main problem facing German banks is that although their corporate clients have become large and global, they have not, thus impairing their ability to supply these firms with the capital they need. Germany’s three-pillar system – including state-owned Landesbanken and Sparkassen, private banks like Deutsche and co-operative banks – has created a fragmented banking landscape.
“The result is that bigger foreign banks have stepped in to close the gap,” says Mr Jaschinski. “That works as long as economic times are good but what happens in times of crisis? Can we then afford to have decisions about credit lines made in New York or London?”
Answering his own question, he says: “This is why, in my view, we need to build a national champion that can provide the financing if, say, a big German firm buys a UK one. Deutsche Bank had that role in the 1990s but it decided to give it up in favour of becoming an investment bank.”
Exploiting the gap created by Deutsche’s absence but also the smallness of other German banks, the likes of Citigroup, Goldman Sachs, BNP Paribas and Royal Bank of Scotland have gained huge market shares in lucrative businesses like big-scale corporate lending and investment banking.
From its sprawling six-wing headquarters in Stuttgart, LBBW is arguably the Landesbank best suited to mount a campaign for consolidation and close that gap. Unlike Nord/LB and HSH Nordbank, which are specialists in shipping and aviation finance, or WestLB, which has significant investment banking capability, LBBW is a broad wholesale bank. Regionally speaking, it is only predominant in Baden-Württemberg, with a €20bn corporate loan book and some retail presence. Hence, in tying up with one of its peers, overlap can be kept to a minimum, while the potential for synergies is great.
LBBW’s size and profitability also speak in its favour. With €428bn in assets and €13bn in Tier 1 capital, it is not only the biggest Landesbank but just one notch under Commerzbank, which is now Germany’s second-largest private institution after Deutsche. LBBW is also the most profitable of its peers, with a current return on equity (RoE) of 16.1%. And in the mid-term, it aims to reach “the 20-percentile range” for RoE, according to Mr Jaschinski. Standard & Poor’s and Fitch assign LBBW a long-term debt rating of A+.
Banking experts note that although LBBW has a good chance of tying up with WestLB, a merger with Bavarian counterpart BayernLB would be ideal because they have a shared history of financing Germany’s most successful firms and have a similar southern German mentality. Mr Jaschinski agrees with this assessment but points out that BayernLB is not entertaining the idea because of its current focus on east European expansion.
Regarding other plans, Mr Jaschinski says that in Germany, LBBW is expanding its corporate finance links in Rhineland Palatinate after acquiring that state’s Landesbank in 2005. The deal also gave LBBW an investment banking team based near Frankfurt. Internationally speaking, LBBW has established 23 offices primarily to support the business expansion of its corporate clients from Baden-Württemberg, says Mr Jaschinski. There are also plans to enter Korea and increase staff in both Tokyo and Mexico City.
