2nd UPDATE: SEB Sells German Retail Banking To Santander For EUR555M

12th Jul 2010 09:13

(Adds detail, background.) By Ulrike Dauer Of DOW JONES NEWSWIRES Swedish bank Skandinaviska Enskilda Banken AB (SEB-A.SK) Monday said it had reached a deal to sell its German retail network to Spain's largest bank, Banco Santander SA (STD), for EUR555 million, confirming a report by Dow Jones Newswires in early June that SEB and Santander were in exclusive talks. Santander outbid Italy's UniCredit SpA (UCG.MI) which, according to one person close to the process, planned to make an offer for around EUR450 million. The deal, which is expected to close at the end of 2010 or in 2011, is a clear signal that Santander wants to become an important player in the German retail banking market. Germany is a core market for the bank, said Santander Chairman Emilio Botin, adding, "This acquisition is a significant step toward achieving our goal of being a full-service retail bank in Europe's largest market." The deal will nearly double Santander's number of branch offices in Germany, and adds one million customers to the six million it already has in the country. SEB said the transaction price of EUR555 million is at a premium to allocated equity of EUR420 million. Transaction costs, including related funding and hedge accounting effects, are estimated at EUR375 million. SEB said the sale will free up capital that will be reinvested in SEB's core strategic growth areas. Germany will remain an important market for SEB, where it will focus on its remaining operations in merchant banking and wealth management, said SEB Chief Executive Annika Falkengren. Its merchant banking also includes some commercial real-estate business. For SEB, the net negative financial impact until closing, including transaction costs, is expected to be EUR240 million pre-tax. Restructuring costs for the remaining German business are estimated to EUR80 million. In addition, there will be "further negative funding effects" from the date of closing, SEB said. For 2011, these effects are estimated to EUR65 million. The transaction includes all 173 branch offices, one million private customers and some 2,000 employees. As per year-end 2009, loan and deposit volumes amounted to EUR8.5 billion and EUR4.6 billion, respectively, and risk-weighted assets to EUR4.7 billion. For Santander, the acquisition will shave off about 10 basis points on its core capital ratio, which stood at 8.8% at the end of the first quarter. At 0747, GMT, SEB shares were down SEK0.20, or 0.5%, at SEK45.71, in line with the overall market. Santander shares were down EUR0.09, or 0.9%, at EUR9.88. The deal is positive for SEB and the price tag is appropriate, said Evli Bank analyst Kimmo Rama. "SEB is more focused on corporate banking in Germany, and the retail branch has been loss-making for some time. In the low-margin German retail banking sector, economy of scale is necessary and thus Santander is a good fit." Santander, which operates Santander Consumer Bank AG in Germany, has bought the German consumer finance business of Royal Bank of Scotland Group PLC (RBS) and the German units of General Electric Money in recent years. It has also done a number of bigger transactions recently. It bought the 25% in its Mexican unit that it didn't already own, and is expected to buy RBS' 318 U.K. branches and has been in talks over buying U.S. retail bank M&T Bank Corp. (MTB) Meanwhile, SEB's move marks a further step in downsizing or withdrawing from some continental European business activities. On June 21, SEB sold its French operations to French bank Societe Generale SA (GLE.FR), with the deal completion expected in the fourth quarter. The bidding is getting considerable attention as it's a rare opportunity for another business to get a stronger foothold in German retail banking, which is dominated by public-sector savings banks and cooperative banks, with a joint market share of around 60%. Commercial banks struggle to get critical size and benefit from economies of scale in the sector. Deutsche Postbank AG (DPB.XE), in which Deutsche Bank AG (DB) owns just below 30%, is the largest commercial player by customers, with 14 million customers. By Ulrike Dauer, Dow Jones Newswires; +49 69 29725 500; [email protected] (Erik Durhan and Christopher Bjork contributed to this article.) (END) Dow Jones Newswires July 12, 2010 04:13 ET (08:13 GMT)