Auf Wiedersehen, Citibank Deutschland

My how the mighty have fallen.  Just over a year ago Citibank was in discussions to buy Deutsche Bank.  Now Deutsche has lost out on a huge opportunity to buy Citibank Privatkunden AG. Citi is under enormous pressure to shore up its capital after losing $$ billions in the subprime mortgage debacle, and the German branch network was one the jewels in its global retail banking banking franchise. Citi has 340 branches in Germany with a market share of about 7% (over 3 million customers).  The bank reported after-tax profits of 365 million euros last year. The operation is being acquired by the French cooperative bank  Crédit Mutuel for approximately 8 billion euros.

Most analysts see this deal a blow to Deutsche Bank’s strategy to grow its domestic German business:

Auf den ersten Blick sieht der Deal nach einer Niederlage für den Chef der Deutschen Bank,
Josef Ackermann, aus. Immer wieder hat er betont, sein Haus müsse auf
dem Heimatmarkt wachsen. Immer wieder hat er sein Interesse an den zum
Verkauf stehenden Instituten Citi- und Postbank
bekundet. Immer wieder hat er aber auch hinzugefügt, er werde nicht um
jeden Preis zukaufen. Es sei nicht sein Ziel, sich selbst mit einer
Großübernahme ein Denkmal zu setzen. (At first glance this appears to be a setback for Deutsche Bank CEO Josef Ackermann.  He has always signaled his strong interest in acquiring Citi and the Postbank when they were put up for sale. But he also stated that he would not just buy at any price.  It isn’t his goal to build a big monument to himself with a giant takeover.)

It is too bad that Citi is exiting from the German retail market; the bank really revolutionized banking services in Germany during the 1980s.  Until Citi came along, people had to endure terrible customer service, low interest rates on deposits, and general arrogance by the indigenous German institutions. CItibank changed that.  Suddenly customers had ATM machines, customer service by telephones, and a variety ot credit cards to choose from.  I know very little about the new owner – Crédit Mutuel – but I doubt very much it has a tradition of product innovation that Citibank brought to Germany.