Published: October 01, 2009
The merger of Dresdner Bank into Commerzbankin May 2009 brings together two of the major German banks to form one new leading bank. The new Commerzbank is a strong, universal bank that combines the financial experience and high-quality advisory services of two long-established institutions. In this Special Feature, we first hear from Martin Blessings, CEO of Commerzbank, about the merger and the new Commerzbank's strategy for the future. In the second part of the feature, Markus Joerg and Dirk Braun discuss some of the implications from a cash management perspective.
Since the merger on 11 May 2009, Dresdner Bank will be integrated into Commerzbank from a legal point of view. This means that within just eight months – much more quickly than was originally planned – we have achieved the formal completion of the take-over. Once the integration has been completed, we will have 1,200 branches and 10,000 employees, providing us with the largest advisory network of any German bank. We will be the leading bank in Germany for private and corporate customers.
Although the merger means that Dresdner Bank will no longer be an independent legal entity, we will initially continue to use the Dresdner Bank brand in terms of the logo and lettering. This will be gradually replaced by the Commerzbank brand over a period which will provisionally extend up to the end of 2010. Until then, the Dresdner Bank brand name will carry the tagline ‘a brand name of Commerzbank AG’ and the Commerzbank trademark illustration will also be shown. There are several reasons for making a phased transition. Over the years, the Dresdner Bank brand has become associated with values such as support and advisory excellence – attributes that we are acquiring and that we wish to reflect in the brand positioning of the new Commerzbank. At the same time we would like to make the transition as smooth as possible for customers.
On this point, developments have been very satisfactory and the integration process is running entirely to plan. Indeed, in some respects we have progressed more quickly than we expected. The two banks are increasingly growing together. Whether the corporate colours are yellow or green will soon cease to make much difference in customers‘ day-to-day interaction with us. Staff are increasingly identifying with the new bank. Naturally this is particularly important for our customers, who ultimately will decide on the success of the new Commerzbank. And our customers are remaining loyal. More than that: in just the first three months of this year, we acquired around 60,000 new customers. All this makes me and my colleagues confident about the challenging tasks that lie ahead. [[[PAGE]]]
What strategy will the new Commerzbank pursue?We have spent the past few months putting the new Commerzbank on the right track, not just legally and organisationally, but in particular, structurally and strategically. We did this in an extremely difficult environment. We have found an answer to the challenges presented by the crisis and by the permanent changes that have occurred in the environment: our three-point ‘Roadmap 2012’ programme, which we presented for the first time in May 2009. Once our programme has been implemented, the bank will be even faster, more efficient and more streamlined than it is today. We are building on our strengths as a relationship bank for private and corporate customers in Germany. We firmly believe in this business model, which is based on reliable customer relationships and trust.
As far as our capital base is concerned, since May 2009 we have had clarity on one important point: the EU Commission has approved the agreement between Commerzbank and the Financial Market Stabilisation Fund (SoFFin) concerning a second strengthening of our capital base. This has now given us the planning certainty that we need in these turbulent times. With our capital base strengthened, the successfully initiated integration, and our continuing success in supporting customers‘ business, we can now say with full justification that Commerzbank has achieved lasting stability in a very challenging environment. And we want to achieve a return to full profitability by 2012. We are assuming that we will be able to pay back the SoFFin funds under favourable market conditions from 2012 onwards.
We are an ambitious bank and we set ourselves demanding but achievable goals. We currently have approximately 11 million customers. In 2008 alone, in spite of the financial crisis, we achieved a net increase of 600,000 customers. As we have said, this growth is continuing in the present year as well. With 1,200 branches and 10,000 employees, we will be closer to our customers than any other German bank. We are already the clear number one for small and medium-sized enterprises, and by far the most important export financier for German industry. With the merger and the successfully proceeding integration, and our sustained success in customer business, we are a clear step further to achieving our goal of becoming the number one bank in Germany for private and corporate customers. Naturally this will be no Sunday afternoon stroll – more like a challenging walk in the mountains. But we are equipped to cope successfully with the path that lies before us. [[[PAGE]]]
As outlined in the interview with Martin Blessing, the merger of Commerzbank and Dresdner Bank is an exciting opportunity for our customers as the new bank emerges as a major new player in the European banking arena. Inevitably, the integration of two large organisations takes time and effort, but the scene is set for a new, bright future for the new Commerzbank and our customers. Some of these benefits are already reaching fruition and some are still to come, as outlined in the remainder of this article.
When we first started the process of integration, it became immediately apparent that the branch networks of the two banks were highly complementary, resulting in a new network that has both geographic breadth and depth, in terms of the number and location of branches. For example, customers of Commerzbank benefit from a larger number of locations; former Dresdner Bank customers benefit from a wider network across Central and Eastern Europe. Already, customers can take advantage of the combined branch network for cash management, trade and various other corporate banking services.
Delivering efficient cash pooling structures that are tailored to the needs of each company remains a core focus for Commerzbank. We will continue to offer both domestic and international cash pooling services, including multi-currency capabilities, and we can support pooling of accounts held with Commerzbank and third-party banks worldwide. The new Commerzbank supports both physical and virtual pooling (margin compensation), providing the greatest possible flexibility for our customers. For our physical pooling service, we provide zero balancing or target balancing based on a variety of user-defined trigger levels. We are able to offer cross-currency physical pooling which is a very convenient solution for some of our customers.
Customers who have worked with both Commerzbank and Dresdner Bank in the past have full access to our entire combined range of capabilities and systems today, and will be able to pool cash across both organisations within a single structure. As part of the migration process, we will be focusing on helping our customers to refine their liquidity management structures so they gain the maximum value from the new Commerzbank and our services.
Over time, the portfolio of products and services offered by the new Commerzbank will be harmonised, with synergies across both internal and customer IT platforms. Our primary objective is to make this process as transparent and smoothly as possible.
Over the past few years, companies have been seeking increasingly efficient information flows with their banking partners to facilitate a higher degree of straight-through processing, better integration with internal systems and more accurate reconciliation. There are various elements to achieving this, including: the communication channel through which information is exchanged, the distribution of information to the relevant counterparties, the timeliness of transmitting and receiving information and the format in which information is transmitted and presented.
In addition to being an active supporter of initiatives such as SWIFT Corporate Access and ISO 20022 financial messaging standards, Commerzbank has a range of capabilities to facilitate convenient communication with our corporate customers. For example, we work with a number of partner banks so that our customers can route payments through Commerzbank’s electronic banking system, which are then routed automatically to the relevant bank. This enables companies to benefit from a convenient single-bank solution with multi-bank reach, reducing the cost and complexity of bank connectivity and facilitating easier integration with internal systems.[[[PAGE]]]
At Commerzbank, we recognise that sustaining a strong relationship between a bank and its customers requires from a bank more than simply providing products. We deliver a flexible service that recognises the diversity of each company’s cash management needs, which may require a different way of working and a variety of products and services. No single cash management entity can deliver a complete spectrum of solutions in every market, so we work closely with partner banks that are market-leading in their respective regions, providing customers with best-in-class solutions whilst benefitting from the convenience and trust of a single relationship.
As well as providing leading products and solutions in the most flexible and convenient way possible, we know that our customers will be interested in the extra value that their relationship with the new Commerzbank will provide in addition to capabilities provided in the past.
Some years ago we set up a consultancy team as we recognised the considerable expertise in payment services and cash management that individuals within both Commerzbank and Dresdner Bank had developed by working with many clients and seeing a wide variety of different solutions in practice. This is a service we are extending, enhancing and resourcing. The diversity of experience provides a unique insight into industry best practices, and it is of benefit to both our customers and to the new Commerzbank to share these insights more widely.
We anticipate that the current trend for centralisation of cash and treasury management activities, and consolidation of cash management structures and banking relationships, will continue. The themes of centralisation and consolidation will also continue to apply to related finance functions such as payables and receivables, with the continued development of payment and collection factories. Furthermore, due to its complementary nature, SWIFT Corporate Access will expand in parallel with these trends as companies seek greater efficiency and portability in their bank connectivity.
To some extent, SEPA (Single Euro Payments Area) should act as a catalyst and accelerate these trends, as it provides harmonisation across payments in the Eurozone and can enable account structures to be simplified; however, currently, adoption of SEPA payment products is still quite slow. SEPA payments are based on XML format (ISO 20022 financial messaging standards) which represents the future of format standardisation for financial messaging – not only for SEPA but also as a universal format for all kinds of payment transactions. So far, although adoption of ISO 20022 has been steady, the introduction of CAMT-messages, the upcoming XML-based standard for electronic account statements, will bring its use even further forward and will close the ‘XML-loop’ in perspective of an end-to-end process between payer, payee and the respective banks. Other initiatives for optimised processes between corporates and their banks, such as SWIFT Exceptions and Investigations (E&I) and eBAM (electronic bank account management), are based on ISO 20022 format, too. [[[PAGE]]]
The new Commerzbank is at the forefront of these developments and a leading proponent of SWIFT connectivity. However, in order to satisfy the diverse needs of our customers, we are putting substantial investment into payment solutions for small and medium-sized enterprises as well as larger organisations. For example, we are piloting a new Commerzbank Payment Solution, an electronic banking solution which combines depth of functionality, highly automated processes, secure and robust infrastructure and convenient access, including email support, mobile approvals, smartphone support etc.
We have developed a pragmatic and straightforward cross-border cash pooling solution for Poland that delivers zero balancing to satisfy our customers’ cash and liquidity management needs. We are planning to introduce this solution shortly.
Another unique element of Commerzbank’s value proposition is the web-based TREASURY application of our corporate banking portal for treasury and cash management, which is available to Commerzbank customers. The TREASURY solution is already in active use by major companies for in-house banking, liquidity planning, bank account management (across all partner banks) foreign exchange and interest rate deal administration, guarantee management and a range of other treasury-related capabilities.
Rapid progress is already being made towards integration of the network, solutions, technology and relationship management between Commerzbank and Dresdner Bank, so our customers are already able to reap the benefits. The future is even brighter, however, and we look forward to meeting and exceeding the expectations of our current and future customers.
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