DZ BANK and WGZ BANK are to merge
- Memorandum of Understanding signed
- Final consolidation in the superstructure of the cooperative financial network
- Consistent focus on the local cooperative banks
- Governance to be developed in line with that of a holding structure
- Potential savings of at least EUR 100 million per annum to be achieved
- Joint bank will commence operations on 1 August 2016
DZ BANK AG and WGZ BANK AG are merging to become a cooperative central institution. They will take the strategic and operative strengths of the two banks, which are derived from a successful business model and complementary market regions, and merge these for the benefit of the entire cooperative financial network. The strategic, commercial and regulatory synergies are substantial. With its consistent focus on the cooperative financial network, the joint central institution will enhance forward-looking cooperation with more than 1,000 cooperative banks from a single source. The Chief Executive Officers and Chairmen of the Supervisory Boards of both institutions have signed a corresponding Memorandum of Understanding (MoU).
"Today is a great day for the entire cooperative financial network. We are uniting two successful central institutions that have come together in recent years. We share the view that now is the right time for this merger – in the interest of the entire organisation. This step will be taken in an equitable, balanced manner and on the basis of equal partnership. Both institutions offer their owners considerable strategic and commercial benefits. Furthermore, in an environment defined by regulations, low interest rates and digitisation, we are opening up new opportunities with respect to earnings and growth for the cooperative banks, the joint central institution and the cooperative sector's specialised service providers," stated Wolfgang Kirsch, Chief Executive Officer of DZ BANK.
Hans-Bernd Wolberg, Chief Executive Officer of WGZ BANK added: "Our two banks are already linked by the clear strategic focus on the cooperative banks, and on a successful cooperation based on a spirit of trust in a wide range of topics. Our merger will now take this into consideration, also with regard to structures. We will further strengthen our foothold at the centre of the cooperative banks, continuously developing the joint central institution into a holding structure and by creating a central advisory council at holding level.
"The merger of DZ BANK and WGZ BANK is the conclusive completion of the process of consolidating the central institutions, which comprised more than 50 entities at the outset. We are therefore contributing to the sustainability of our cooperative financial network in times of growing market-induced and regulatory challenges,” stated Helmut Gottschalk, Chairman of the Supervisory Board. Werner Böhnke, Chairman of the Supervisory Board of WGZ BANK, explained: "The planned merger is based on the stable foundation, where both institutions focus consistently on the cooperative banking network, and on their successful cooperation that has been intensified in recent years. Furthermore, both banks have successfully passed the comprehensive assessment conducted by the European Central Bank in 2014. This increased level of trust will now allow us to take this major step forward with confidence and in the interest of our organisation."
Focus on the cooperative financial network
Both banks believe that the promotion of the cooperative banks throughout Germany is integral to the business activities of the joint central institution. It will further develop its central institution services on this basis, in a consistent and effective manner. The range of subsidiary products and services available to the local cooperative banks will be consistently developed and extended, to intensify the customer service in this way too. In Corporate Banking, the collaboration with the cooperative banks will concentrate in particular on large and medium-sized companies. In addition, further business opportunities in the Corporate Banking, Investment Banking (with institutional and retail customers) and Transaction Banking business segments shall continue to be seized.
New governance structure strengthens the influence of the cooperative banks
DZ BANK and WGZ BANK both agree that the comprehensive strategy and management functions should be combined in a holding company that carries out only a few tasks related to the cooperative network, taking into account the regulatory framework conditions. The business activities of the former central institutions will be located in one specific unit on one level with the other cooperative sector's specialized service providers. This means maximum transparency can be achieved in the results structure, together with highly effective management of the business activities.
In addition, a central council will be established at DZ BANK Group holding level, comprising representatives of the cooperative banks. This is designed to guarantee their ability to influence strategically important decisions made by the merged bank on a sustained basis. The conversion to the holding model should take place after the integration is completed by the end of the decade.
Frankfurt and Düsseldorf shall be the main locations of the united central institution
The merged central institution will continue to service the local cooperative banks in line with local market conditions. The decentralised structure will be retained in the bank support activities and in Corporate Banking. The business with the cooperative banks shall be managed and controlled in the future from Düsseldorf. The regional corporate customer service, as well as the back office and settlement activities, shall be based here too. The central services and steering functions shall be bundled gradually in Frankfurt, where the joint institution also has its legal domicile.
The joint central institution shall be called DZ BANK. It will operate under the slogan "Die Initiativbank" and, as "DZ BANK. Die Initiativbank", shall combine elements of both institutions.
Potential savings to be realised
DZ BANK and WGZ BANK have a sustainable business model and possess a stable earnings base. The joint institution can expect to achieve direct earnings and cost synergies of at least EUR 100 million per annum after the integration is completed. These will be derived in particular from more efficient market development together with the cooperative banks. Cost synergies will also arise within the scope of structures, processes and infrastructure, for example in the IT division. Duplicate investments can also be avoided – by integrating the IT and process platform, among other things, in cooperation with the cooperative computing centre.
The merger can have positive implications for the capital ratios in the joint institution's statement of capital, in the course of implementing the Basel III rules. These effects will substantially enhance the assets and financial resources, and are mainly as a result of the discontinuation of items deducted from regulatory capital.
Management structure and employees
DZ BANK and WGZ BANK agree on the following recommendations regarding the future management of the merged central institution:
- Wolfgang Kirsch shall be appointed Chief
Executive Officer, while Hans-Bernd Wolberg
will assume the position of Deputy Chief
- Helmut Gottschalk will act as Chairman of the
Supervisory Board. Werner Böhnke will
takeon the role of Deputy Chairman of the
Supervisory Board – in addition to the Deputy
Chairman to be elected from the members of
the employee representatives, as required by
the German Co-Determination Act
In addition, the Board of Managing Directors shall consist of the following members:
- Uwe Berghaus
- Dr Christian Brauckmann
- Lars Hille
- Wolfgang Köhler
- Karl-Heinz Moll
- Dr Cornelius Riese
- Michael Speth
- Thomas Ullrich
- Frank Westhoff
- Stefan Zeidler
The allocation of the Board of Managing Directors mandates should be definitively determined as quickly as possible in the course of drawing up the entire organisational structure.
Both DZ BANK and WGZ BANK view their employees as the most important success factor and will give adequate consideration to the legitimate interests of the employees of both banks. All measures concerning personnel shall be dealt with in an open, transparent and fair process, and in keeping with all rights of the responsible employee representative bodies. None of the joint central institution's locations shall be subject to a one-sided burden as a result.
Transaction structure and timeline
The transaction structure shall be a "merger by way of acquisition". The assets of WGZ BANK shall be transferred to DZ BANK as the acquiring legal entity. The shareholders of WGZ BANK shall be granted shares in DZ BANK in exchange within the scope of a capital increase. The exchange ratio shall be based on the enterprise valuation of both institutions. A due diligence will represent the starting point for the valuation, which will be conducted by KPMG AG Wirtschaftsprüfungsgesellschaft in both institutions.
The signing of the Merger Agreement is scheduled for March-April 2016. The decision-making annual general meetings of DZ BANK and WGZ BANK shall discuss the topic in June 2016. The joint central institution is scheduled to be launched on 1 August 2016.
Martin Roth, Divisional Head, Communication
Tel.: +49 (0)69 7447-42750
Eberhard Roll, Press Officer
Tel.: +49 (0)211 778-1108