Siemens the financial engineer
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Siemens the financial engineer

In-house banking is out of fashion - except in Munich, where industrial colossus Siemens has set up its own financial institution. It even aims to attract outside customers. Does the company know what it is doing? And can it make any real money in banking? By Laura Covill.

Ask any supplier or customer about Siemens and they will mention its power. Not as a market leader, an innovator or a generator of impressive profits perhaps, but as a colossus - one of the largest, most diversified industrial groups in Europe, with financial clout to match.

Appropriately for a company which handles massive liquidity, Siemens is regarded as an expert in managing short-term cash assets. It is telling that the Dm110 billion ($60 billion) power-stations-to-semiconductors conglomerate earns as much from interest income as from its manufacturing operations.

As a result, Siemens has always been able to handle much of its own financial business, such as cash management. Moreover, the company usually has the cashflow to fund even the largest investments, such as this year's $1.5 billion acquisition of Westinghouse. "I can't remember when I last lent money to Siemens," is a typical comment from one German banker.

The old adage that Siemens is "a bank with an electronics department attached" is wrong - that's not how the company makes its money. But the phrase gives an idea of Siemens' power in its dealings with real banks.

Not content with having the upper hand in its banking relationships, Siemens is now reaching for even more financial autonomy.

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