For Germany’s Banks, a Grim Future

Want to buy a money-losing bank with a damaged business model in an overcrowded market? Neither, it seems, do many other people.

Germany may have Europe’s largest and most robust economy, but investors are not clamoring for a piece of its banking market.

An auction for WestLB, a publicly owned institution in Düsseldorf that was once Germany’s third-largest lender, has attracted just two bidders, a lawyer hired to sell the bank said on Wednesday.

The woes of WestLB, which has received $11 billion in taxpayer support since 2009, are symptomatic of a larger problem in the German economy.

Many of its biggest banks are still on government life support after making bad lending bets during the bubble years.

And with their access to cheap capital long gone, their prospects of becoming profitable again are dubious.

“The fragility of the German banking sector poses a substantial threat to sustained economic recovery in Germany,” said Jörg Rocholl, a professor at the European School of Management and Technology in Berlin. “The excellent economic situation is not mirrored by the banking system.” Read more