3rd UPDATE: Santander Buys SEB German Retail Ops For EUR555M

12th Jul 2010 13:15

(Rewrites, adds detail, further comment.) By Ulrike Dauer, Christopher Bjork and Erik Durhan Of DOW JONES NEWSWIRES Spain's Banco Santander SA (STD) said Monday it will buy Skandinaviska Enskilda Banken AB's(SEB-A.SK) German retail network for EUR555 million, expanding its retail banking services in Europe's largest economy to include mortgages and deposits. Santander, the euro zone's largest bank by market value, will double its German branch network with the deal, which forms part of its continuing push into northern Europe in search of growth. Germany is a core market for the bank, said Santander Chairman Emilio Botin: "This acquisition is a significant step toward achieving our goal of being a full-service retail bank in Europe's largest market." Santander has until now been an active player in consumer finance in Germany, where it commands a 14% market share, but it doesn't offer bread-and-butter retail banking services such as mortgages and deposits. The deal is expected to close towards the end of this year or the beginning of next. "It's a good time to gain exposure to Germany, and they're taking advantage of the selling mood among European banks," said Carlos Peixoto, an analyst at Portuguese investment bank BPI, which has a buy rating on Santander. The move adds 1 million customers to the 6 million Santander already has in the country. Santander will take over SEB's 173 branch offices, and 2,000 of the Swedish bank's employees in Germany, out of 3,700. It will also acquire EUR8.5 billion in loans as part of the deal--of which 82% are mortgages--and EUR4.6 billion in deposits. Santander currently has 144 branch offices in Germany, 3,336 employees and EUR22.3 billion in outstanding loans. SEB, which reported a EUR88.2 million loss at its German unit last year, said it will restructure its remaining German activities, and will focus on merchant banking and wealth management. The Stockholm-based bank said it will take a EUR240 million loss as a result of the sale and costs associated with the separation of its business in the country. The sale is the second by SEB in as many months. Last month, it sold its French operations to Societe Generale SA (GLE.FR). "SEB is more focused on corporate banking in Germany, and the retail branch has been loss-making for some time," said Evli Bank analyst Kimmo Rama. "In the low-margin German retail banking sector, economies of scale are necessary and thus Santander is a good fit," he said. At 1130 GMT, Santander was trading down 1.3%, or EUR0.13, at EUR9.84, in a lower Spanish market, somewhat lower than the overall market. SEB was down 1% at SEK45.45. The acquisition will shave off about 10 basis points of Santander's core capital ratio, which stood at 8.8% at the end of the first quarter. Santander took advantage of the weakness of other banks during the financial crisis to snap up cheap assets in the past two years. It bought several assets in the U.K. and the U.S., and in Germany it bought Royal Bank of Scotland Group PLC (RBS) and General Electric's (GE) German consumer finance businesses. In the U.K. it bought Alliance & Leicester and Bradford & Bingley, and it has moved quickly to integrate these into its existing franchise. It is also widely expected to buy 318 branch offices from RBS after presenting a binding bid earlier this year. Analysts expect further acquisitions by Santander in Germany once it gets the retail bank up and running there. Retail banking in Germany is dominated by public-sector savings banks and cooperatives, with a joint market share of around 60%. Commercial banks struggle to get critical size and benefit from economies of scale. Deutsche Postbank AG (DPB.XE), in which Deutsche Bank AG (DB) owns just under 30%, is the largest commercial player by customers, with 14 million clients. "Now that (Santander) has gained critical mass in the U.K., it seems to be shifting its focus to Germany," said Nuria Alvarez, an analyst at Renta 4 in Madrid. "It's reasonable that it focuses its acquisition capacity on another European country," she said. By Ulrike Dauer, Christopher Bjork and Erik Durhan, Dow Jones Newswires; +49 69 29725 500; [email protected] (Sabrina Cohen contributed to this article.) (END) Dow Jones Newswires July 12, 2010 08:15 ET (12:15 GMT)