Deutsche Bank wants to jump to Wirecard Bank’s rescue. The financial institution is examining possible financial assistance in coordination with the financial supervisory authority BaFin, the insolvency administrator of the parent company Wirecard AG and the Board of Management of Wirecard Bank, Deutsche Bank declared on Thursday. “In principle, we can imagine providing this support within the scope of continuing business activities, should this become necessary.
According to insiders, this puts Deutsche Bank in a good starting position for a possible takeover of Wirecard Bank. Deutsche Bank CEO Christian Sewing has repeatedly stressed how important the payment transaction business is for his institution. As a rule, stable earnings can be achieved with this business.
In contrast to its parent company, Wirecard Bank has not yet become insolvent. BaFin has appointed the Bundesbank as special representative there to ensure that no funds are transferred to the AG and that business continues to run. Wirecard Bank has a full banking license and is allowed to offer all financial services. Since the beginning of the year, it has been advertising at an interest rate of 0.75 percent for giro balances on the “Boon Planet” banking app, while other institutions hardly pay any interest even on fixed-term deposits or even charge penalties.
According to the 2018 Annual Report, the balance sheet total of Wirecard Bank amounted to 1.6 billion euros – about the same amount as a medium-sized German savings bank. At the end of 2018, savings deposits of nearly 1.4 billion euros were thus held at the bank. These are protected by the statutory deposit guarantee scheme and the Deposit Protection Fund of private banks. According to the Banking Association BdB, the scope of protection for each customer was 19.7 million euros (as of June 2020). The bank is also a member of the Deposit Protection Fund of Private Banks.
Important customers are already running away from Wirecard Bank. Since the beginning of July, Aldi Süd, for instance, has been processing its customers’ credit card payments via its competitor Payone, which belongs to the payment provider Ingenico, as the discounter announced. In future, only the Aldi gift card will be settled via Wirecard Bank. The credit balance on it is “secure and covered”. Aldi had only announced its cooperation with Wirecard in the fall. Aldi Nord also works with Wirecard, but still does not want to comment. According to a report in the “Wall Street Journal”, the Japanese technology group Softbank also intends to terminate its five-year cooperation. No comments were received from Wirecard and Softbank.
Established in 1999, Wirecard processes payments from customers to merchants and guarantees companies that they will receive their money from customers. It charges a fee for this service and, according to published figures, has grown so strongly in recent years that it has made it into the leading German index, the Dax. After a hole of 1.9 billion euros appeared on the balance sheet, it filed for insolvency.
BaFin President Felix Hufeld called the balance sheet scandal a “massive crime”. He said that documents had been falsified with enormous criminal energy. Now it had to be cleared up who had cheated whom. “Who are the bad guys and who are the good guys who just weren’t up to the challenge?” So far, no one knows the answer. One of the lessons of the scandal was to improve auditing. BaFin, which Hufeld has been in charge of since 2015, has itself come under massive criticism because of the Wirecard scandal. SPD digital expert Jens Zimmermann demanded more powers for the Bafin as a consequence of the balance sheet scandal. He said that it obviously did not have all the access possibilities.
In the meantime, Wirecard has filed for insolvency for six other service subsidiaries in Germany with 1270 employees. They should be continued if possible, declared insolvency administrator Michael Jaffe. With the application, their employees will also benefit from the insolvency money for the months June to August, as will the 250 employees of the AG. The payment for June is expected next week. Further insolvency applications cannot be ruled out.
For more interesting investment ideas, check out the Capitalist Partners Newsletter