Commerzbank will today announce it is buying Bavaria's loss-making SchmidtBank for between Ђ60m (US$75m) and Ђ70m, providing a glimmer of hope for the long-promised consolidation of Germany's fragmented banking sector.
Commerzbank has held a 16 per cent stake in SchmidtBank for more than two years. A combination of bad loans and overambitious expansion saw SchmidtBank suffer a Ђ1.3bn loss in 2001, bringing it to the brink of collapse before a rescue plan hatched between Commerzbank, HVB, Deutsche Bank, Dresdner Bank and Bayerische Landesbank.
An allegation that SchmidtBank was reckless in granting unsecured credit to small- and medium-sized business (SME) customers in southern and eastern Germany, which then generated huge bad debts, is under investigation.
