Walking wounded

5 November 2010 By Nicholas Paisner

BayernLB has pulled out of merger talks with WestLB. But the Bavarian lender’s standalone prospects don’t look compelling: it made a firsthalf return on equity of just 7.5 pct. Its reluctance to engage further doesn’t bode well for the sector’s restructuring.

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BayernLB said on Nov. 4 that it had discontinued merger talks with WestLB. The two banks said they were exploring the possibility of a merger on Sept. 20.

BayernLB's board concluded that "the economic benefits of a tie up compared to the profitability of an independent BayernLB do not sufficiently outweigh the typical challenges of implementing a merger of this size."

Gerd Haeusler, BayernLB's chief executive, told a German newspaper on Sept. 22 that a merger with WestLB could boost the bank's return on equity "by up to 2 percentage points in the midterm."

WestLB noted "with regret the decision to suspend the talks before the key issues involved have been clarified." The bank said that it would continue with its ongoing sale process. A number of interested parties submitted expressions of interest in late October.

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