Best bank: Commerzbank
Commerzbank has seen a remarkable bounce back in its profitability and share price over the past four years, something that was particularly apparent in 2023. The year began with its re-inclusion in the DAX in February, five years after it was ejected from the index of German blue-chip stocks. This was thanks to a dramatic recovery in its share price from the depths it hit during the early Covid-19 period.
The share price continued to rise in 2023 and early 2024, as it posted its highest net profit in 15 years for the 2023 financial year: €2.2 billion, up 57% year on year. This allowed chief executive Manfred Knof and chief financial officer Bettina Orlopp to reach a 7% return on equity target previously set for 2024 a year early – despite a €1 billion litigation provision concerning Swiss franc mortgages in Poland booked in 2023. It also paved the way for an increased dividend and share buyback programme.
In November the bank announced new targets, including a goal to reach a return on equity of more than 11% by 2027, well beyond the 4% targeted in 2023 under the previous management.
While interest rates have helped, Knof and his team have clearly tackled acute investor and supervisory concern about the lack of resolution in plans to turn around the bank’s dire profitability, which led to the 2020 departure of his predecessor, Martin Zielke. In addition to other cost saving exercises, including relatively successful IT programmes, the bank reached a targeted gross reduction in full-time employees of 10,000 in 2023. It has also completed a planned reduction in its branch network to 450 locations.
Good asset quality helps. Commerzbank is well positioned in this regard partly thanks to having retreated from commercial real estate (CRE) in the prior decade. An end to the last CRE boom contributed to an economic contraction in Germany in 2023, raising the prospect of large CRE losses at the banks. Commerz, however, had less than 5% of its loan book in commercial real estate at the latest European Banking Authority transparency exercise, compared to more than 20% at the largest Landesbanken.
After its long years of restructuring, Commerzbank is now better able to invest in its future. This involves a new focus on wealth and asset management, including sustainable investments as shown recently by the acquisition of Aquila Capital.
It is also investing in corporate banking, especially in terms of technology, where it enjoys one of Germany’s strongest mid-cap franchises.
The bank recently notched up 6,000 clients in its three-year-old Mittelstandsbank Direkt platform. This serves mid-cap clients with a digital-first approach, reducing reliance on branches and orienting more towards a new generation of family owners. It is embarking on an update to its system for high-value cross-border payments on the ISO20022 messaging standard, partnering with German financial software company PPI. It has also set up a new joint venture for SMEs with payments technology firm Global Payments.
Best investment bank: Deutsche Bank
In 2023, Deutsche Bank’s German investment banking revenues beat any other bank – local or international – according to Dealogic. It had top positions across debt and equity capital markets, M&A and loans. Only one other locally headquartered group featured in the top ten in terms of overall revenues, Commerzbank, which was 10th.
Given that Deutsche was also top in 2022, this is clearly not a one-off result, driven by one or two large M&A deals, nor is Deutsche just a token German name on deals, as some US rivals suggest.
Looking at the largest IPOs of 2023, for example, Deutsche had a global-coordinator role on the listings of SCHOTT Pharma, Thyssenkrupp Nucera and IONOS. The year was marked by capital increases for companies that were already listed and it was also global coordinator and process bank on a €1.8 billion rights issues by TUI and joint bookrunner on an €808 million rights issue by ams-OSRAM, in addition to smaller deals.
In M&A, Deutsche advised on public transactions including takeover bids for Synlab by Cinven, Klöckner & Co by Swoctem, Vitesco by Schaeffler and OHB by KKR. It was also involved in auction processes such as the sale to Foxconn of the Behr-Hella Thermocontrol joint venture with HELLA and MAHLE, the sale of a 50% stake in ZF Friedrichshafen’s chassis-systems business to Foxconn and the sale by Siemens Energy of Trench to Triton.
In debt capital markets, Deutsche’s lead is even clearer. Highlights included acting as active bookrunner on corporate bonds such as the euro-denominated deals for Robert Bosch, Sartorius, Bayer and Deutsche Börse. It also acted as lead manager of Porsche Automobil Holding’s €2.7 billion Schuldschein, the largest ever issue in that format. Foreign currency bonds included Swiss franc transactions for Fresenius and Mercedes-Benz, one in Australian dollars for Deutsche Bahn and US dollar placements for BMW and Daimler Truck.
Similar leadership was evident in the financial institutions and leveraged finance markets. Deutsche played instrumental roles in financial institutions deals, ranging from a €1 billion hybrid issuance and liability management exercise for Allianz to a debut tier-2 bond from Oldenburgische Landesbank. In leveraged finance, its deals ranged from the senior secured notes and €1 billion term loan B supporting Cinven’s take-private of Synlab to Cheplapharm’s €425 million senior secured notes and €325 million floating rate notes.
Best digital bank: ING
ING expanded its digital product offering, introducing new technology and digitizing services in various segments.
Its self-execution tool, which the bank offers in partnership with the online wealth manager Scalable Capital, reached over two million clients in 2023.
The bank also expanded its product range for small and medium-sized enterprises, as well as the self-employed. It introduced the Business Extra Account, an interest-bearing digital call money account for business customers.
For its corporate clients, the bank improved its InsideBusiness portal by adding fully digital onboarding for new legal entities as a self-service option.
Best bank for SMEs: Commerzbank
In 2023 Commerzbank worked with both industry stakeholders and technology vendors to launch new initiatives for German small and medium-sized enterprises. These efforts translated into improved profitability of its small-business segment despite a challenging market environment.
Commerzbank and the European Investment Bank (EIB) partnered in 2023 to introduce a new guaranteed programme to support medium-sized businesses. Companies with between 250 and 3,000 employees can apply for long-term funding, with a total of €400 million being made available for the programme. The EIB will provide guarantees covering up to 50% of the loan amount.
In addition, the bank collaborated with Microsoft to deploy generative artificial intelligence and its avatar technology for a new virtual assistant in its mobile app.
Last year also saw Commerzbank become the first German full-service bank to be granted a crypto custody licence. It has been able to offer new digital asset services for its SME clients in 2024.
Best bank for ESG: ING
For its mix of sustainable finance structuring expertise and innovation in retail banking, ING wins the award this year.
The Dutch bank demonstrated its expertise and capabilities across key areas of the German sustainable finance market, where it picks up mandates both advising – either as sustainability adviser or coordinator – and bookrunning transactions for a range of issuers across sectors and asset classes.
In total last year, ING supported 85 sustainable finance transactions (an increase of 55% on 2022), worth a total of about €20 billion, for some of Germany’s corporate elite across the domestic loan, bond and Schuldschein markets.
Among many notable transactions, some of the standouts include: advising and bookrunning software firm SAP’s €3 billion sustainability-linked syndicated revolver; a €750 million sustainability-linked bond for Heidelberg Materials; a €2 billion green bond for Volkswagen Financial Services; and a €850 million sustainability-linked Schuldschein for healthcare equipment provider Fresenius.
ING was also involved as global coordinator, active bookrunner and arranger on a slew of sustainable and green bond issues for German banks – demonstrating that it is a trusted partner among its peers – and supported the €4.2 billion debt financing of the world’s first large-scale green steel plant.
Along with the advice and financing power it provides its corporate and institutional clients, ING innovated last year in consumer banking, where it introduced a new sustainable feature to its current account.
Called Girokonto Future, the feature is an alliance between ING and the social-impact company called share, which receives a monthly grant of one euro per customer from the bank. As part of the deal, the customer chooses which social project it wants to support from a range that share offers.
In addition, ING is committed to matching all customer deposits in the Girokonto Future segment with corresponding investments in sustainable loans and investments.
Best bank for corporates: Deutsche Bank
Deutsche Bank worked on several complex and time-critical financings in Germany last year.
It was the primary financial adviser and lead structuring bank for Messer Group’s €4.2 billion acquisition financing and coordinated Schaeffler’s €3.45 billion tender offer for Vitesco shares. The bank also managed Hensoldt’s €700 million acquisition financing, a €700 million bridge and term loan package, and Dürr’s €500 million bridge financing for the acquisition of BBS Automation, showcasing robust underwriting and book-running capabilities.
Sustainability-linked financings included the €2.7 billion revolving credit facility for Tui and the €2.5 billion inaugural revolving credit facility for Porsche.
In the FX markets, it introduced several product enhancements, including exchange for related position futures trading and 360T mid-matching, and improved its Asia non-deliverable forward offering, boosting volumes by 275% in the second half of 2023.
