Hans-Dieter Brenner: Helaba – A state bank with a future

FH-Fotos-Maintower2009-046-kopieren
Helaba Landesbank Hessen-Thüringen (Helaba) is one of Germany’s leading banks with a current transaction volume of 200 billion euros and a staff of 6,300. With its two registered offices in Frankfurt and Erfurt, the bank is anchored in one of Europe’s most im­­portant business regions. Another key pillar of the bank is its branch in Düs­sel­dorf, located in North Rhine-West­phalia – Germany’s most attractive regional market. Helaba has a stable long-term strategic business model. The bank is closely tied to the real eco­n­omy, with customer accounts receivable making up a high percentage of the balance sheet total, its function as a central bank for nearly 170 savings banks (Sparkassen) in the states of Hessen, Thuringia, North Rhine-West­phalia and Brandenburg, and as a de­­­­vel­op­ment and infrastructure bank for the state of Hessen. This business mo­­del is one of the significant success factors, and has also helped Helaba remain stable during the financial crisis.

Unbenannt-1

A business model provides answers to three questions: What benefit does the bank provide for its customers and strategic partners? How is the benefit for these customers and strategic part­ners generated? How is money earn­ed? These issues make it clear that a range of models are possible, depending on the legal form and focus of business activities. However, differentiating be­­tween private, cooperative and public law institutions is not enough. Even within the individual pillars of our bank­­ing system, it is not possible to find a common answer to the question of the successful business model.

This is particularly clear in the state ban­k­­ing sector. Historically, state banks have acted central banks for savings banks, and as district or state banks for the individual states in which they operate. However, this does not mean that all state banks are also public law institutions, promote public development or possess an integrated state buil­ding society. What most state banks have in common, however, is that business with associated savings banks holds a significant and strategic value. It provides the state banks, as product supplier and service platform, with a direct link to the savings bank’s retail business and business with medium-sized companies. This tie is even closer if – as is the case with Helaba – the regional state building society and a non-competitive development bank are both under the umbrella of the state bank. This special constellation gives savings banks and Helaba a broad, div­ersified business portfolio and a solid standpoint in the primary business of their region. This proved to be an ad­­van­tage during the financial crisis. Banks with diversified business portfolios and close proximity to the real economy were less vulnerable to market fluctuations.

Fenster_MT-kopieren
The work with affiliated savings banks in the S-Group gains additional signifi­cance in light of the changes to the regulatory environment. New capital and liquidity requirements, combined with the constantly increasing structur­al costs for banks – such as bank levies, compliance with expanded regulatory and statutory obligations and costs caused by multiple billing – are placing a sustained burden on the banks’ prof­itability. The returns on equity for the sector are declining, resulting in an in­­creased focus on customer-oriented bus­­i­­ness. The way of the future is there­fore leading away from equity binding and towards equity mitigating business mo­­dels. Helaba is pursuing this course. The bank began concentrating on less capital-intensive business sectors as early as 2008. Helaba possesses one of the market’s leading capital investment companies in Helaba Invest and, with its Frankfurter Bankgesellschaft, is a successful private bank active in the market as a nationwide partner for sav­ings banks. In addition, Helaba has long had a tradition of established core bus­i­­ness segments with its business with associated banks, in which equity is not the limiting factor.

Geschäftsmodell

The bank’s customer and S-Group orientation continues to be a central pillar of all strategic development options. He­­­laba is on its way to becoming a lead­­ing S-Group bank within the German sav­ings bank organisation. Another step in this direction was the acquisition of the business with associated banks of the former WestLB in September 2012. As part of this transaction, Helaba as­­sumed a business volume of over 40 billion euros and more than 400 em­­ployees. The transaction also included the acceptance of new bank owners. Along with the three regional savings bank associations, the list of Helaba owners now includes the German Sav­ings Bank Association as owner of the security reserves of the state banks and the security reserves of the regional savings bank associations, as well as the State of Hessen and the Free State of Thuringia. This means that Helaba is de facto sponsored by the entire German savings bank organisation. Such a solid position is one of the elementary re­­qui­re­­ments for successful activity as a state bank in the market in the long term.

The public promotion-related and infrastructure business is also important for Helaba’s strategic business model. The Wirtschafts- und Infrastrukturbank Hes­­sen (WIBank) is an integral part of the bank. This Helaba business unit as­­sumes public promotion tasks on behalf of the State of Hessen via the WIBank, particularly in housing and municipal development, infrastructure, business, agriculture and the environment. In bus­­i­­ness development, Helaba is also a stakeholder in numerous other develop­ment institutions in Hessen and Thur­in­gia, in particular involving guarantee banks and medium-sized holding companies. Helaba contributes significantly to securing and developing the location in Hessen with its non-competitive public promotion-related business.

FH-Fotos-Maintower2009-116-kopieren

A successful business model must en­­sure the desired stability and necessary profitability. Helaba’s orientation as a universal bank with a strong regional focus and low-risk business profile provides the best conditions for achieving this objective. The bank is characterised by close ties to the real economy and a correspondingly high share of custom­­er-oriented business in the core region, as well as in selected international bus­i­­ness segments. A state bank organised like this, with its own direct customer business, is the natural and necessary addition to the savings bank’s private and SME business. In addition, it is vital for the performance of the S-Group bus­­i­­ness and stability of the business model that a state bank in a metropolitan area with intense competition in the banking sector – for example in the Rhine-Main region – also possesses its own stake in private customer and SME business.

Helaba and its solid business model are in an excellent position to face the future. The financial centre of Frankfurt, the core market Hessen-Thuringia, as well as North Rhine-Westphalia and Bran­den­burg, provide a good founda­tion for further expanding Helaba’s business model as an integrated universal bank. Thanks to its robust constitution, Helaba has one of the highest credit ratings of any German bank. Its good ratings – including via refinancing – are the basis for Helaba’s success as a com­­mercial bank. Helaba will be an essential part of further consolidation in the state banking sector – however it may develop.

VV_HrBrenner_Portrait-KopieThe business graduate began his career at KPMG Peat Marwick Treuhand GmbH. In 1993, Brenner, who is also a tax con­­­sult­ant and auditor, was appointed branch manager and partner of KPMG Deutsche Treuhand Gesell­schaft AG. In 2001, he joined Helaba Landesbank Hessen-Thüringen, where he has been a member of the management board since 2002. He was named CEO in 2008.