Deutsche Bank and Commerzbank are talking about a possible merger. This is probably due not least to the fact that their stock market value has fallen significantly in recent years. Lower margins, stagnating restructuring efforts and especially at Deutsche Bank. New scandals and scandals have meant that the share prices of both major banks today are significantly lower than ten years ago. Shareholders such as the US investor Cerberus, which is involved in both institutions, are hoping for a merger, tailwind for the stock valuations.
Will the mereger pull the two banks out of the swamp?
Whether a merger can pull the two banks out of the swamp is anything but certain. One could even see the struggle between Deutscher Bank and Commerzbank for a way out of the profitability crisis, as an example of how much traditional financial institutions are struggling in the meantime. Most financial startups do not know such difficulties. While established credit institutions struggle to stay competitive. And market watchers in the fintech industry are predicting unbridled growth.
The expansion of the fintech sector clearly gained momentum in the first half of 2018. This is according to experts from the consulting firm KPMG in its latest issue of its biannual report, Pulse of Fintech. The volume of venture capital and private equity financing as well as mergers and acquisitions had already clearly exceeded the total value of the previous year by the middle of the year. This was mainly due to two major deals. The Alibaba subsidiary Ant Financial was able to collect the record sum of 14 billion US dollars in a new round of financing. And the US map specialist Vantiv took over for 12.9 billion US dollar the British competitor Worldpay.
Fintechs are opening up more and more countries
For the current year, KPMG experts Ian Pollari and Anton Ruddenklau predict further growth for all areas of the fintech industry. As an important driver they call the second payment service directive of the European Union (Payment Service Directive 2, PSD2). As part of this, several new regulations come into force this year to make electronic payments safer and more flexible. Australia is also planning steps towards so-called open banking in the current year. This keyword refers to the opening of banks and their data for other service providers. The KPMG authors wrote that, these changes in the financial landscape should drive investment in Fintechs.
The fintech market is growing both in width and in depth. Financial startups are opening up to more and more countries. And offering more and more specialized products and services. The results of the latest reporting season also give cause for optimism, says Vincent Vinatier, fund manager at Axa Investment Managers. More and more financial services companies are starting to integrate fintech into their business model as they increasingly understand that technical innovation is changing their business. Meanwhile, established technology companies are increasingly working with fintechs to attract clients from the financial industry.
Paypal beats the Deutsche Bank
Given the excellent growth prospects, it is no wonder that analysts see fintech stocks as having more upside potential than the names of many traditional banks. The development so far seems to prove them right. While Deutsche Bank’s share price fell about 50 percent in the past three years, the stock of the US payment service provider Paypal gained almost 160 percent over the same period.
Also published on Medium.