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German fintech to push Commerzbank out of DAX 30
FRANKFURT AM MAIN, Sept 5, 2018 (BSS/AFP) – Wirecard, a Bavarian start-up
specialised in online payments, is set to nudge German giant Commerzbank out
of the blue-chip DAX index on Wednesday, in the latest sign of plucky
fintechs outshining traditional lenders.
Frankfurt stock exchange operator Deutsche Boerse plans to unveil the new
composition of the DAX 30 index of leading German firms at 10:00 pm (2000
GMT), as part of a regular review of listed companies’ market capitalisation
and trading volumes.
Commerzbank is Germany’s second-largest lender and a founding member of
the prestigious DAX club three decades ago.
But the ailing bank, which had to be rescued by the German state during
the financial crisis, has seen its share price plunge by a third since
January to give it a market cap of just over 10 billion euros ($11.5 billion)
— the lowest of all DAX 30 players.
Investor darling Wirecard, currently listed on the TecDAX index, is widely
expected to take Commerzbank’s spot in the reshuffle.
The so-called “financial technology” (fintech) company that makes software
for cashless and contactless payments has seen its share price soar by 110
percent this year.
It has a market cap of over 23 billion euros, surpassing even flagship
lender Deutsche Bank which is valued at some 20.5 billion euros — and was
itself axed from the eurozone’s benchmark Eurostoxx 50 index on Monday.
Wirecard is now the country’s third-largest financial group on the German
stock market behind insurance behemoths Allianz and Munich Re.
– From porn to cashless king –
Founded in a Munich suburb in 1999 at the height of the dot come bubble,
Wirecard started out processing card payments for gambling and pornography
websites.
Its rise has been fuelled by the boom in e-commerce and surging demand for
online transactions as well as payments made just by holding a credit card or
smartphone over a reader, technologies that have shaken up the financial
sector and left old-school banks struggling to keep up.
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Wirecard’s clients include duty free shops at airports, the Air France-KLM
carrier, mobile phone operators O2 and Orange as well as travel firm TUI and
supermarket chain Aldi.
In a sign of its global ambitions, Wirecard has clinched partnerships with
Chinese mobile payment companies Alipay and WeChat Pay, hoping to cash in on
the burgeoning market of using apps to pay for goods in real-world shops.
Wirecard CEO Markus Braun said only around two percent of transactions
around the world today are fully digital, with cash still accounting for the
bulk of purchases.
“We want to make payments invisible,” Braun recently told the Frankfurt
Allgemeine daily.
“We see this market growing 10-fold, or even 30-fold in the future.”
Wirecard, which has a German banking license, this year also started
offering its own lines of credit to small- and medium-sized enterprises.
– Dinosaur v Wunderkind –
Wunderkind Wirecard’s ascent comes as Germany’s two biggest banks, weighed
down by increased competition, low interest rates and costly restructurings,
are losing importance on the global stage.
German Finance Minister Olaf Scholz last week said the decline of Deutsche
and Commerzbank was “a problem” for Germany’s export-reliant companies, as
local lenders can’t match the scale or reach of foreign rivals.
How the German banking sector develops from here will depend partly on the
ability “of traditional actors to adapt to new technologies”, according to
Claudia Buch, vice president of Germany’s Bundesbank central bank.
Commerzbank has already shrugged off its looming DAX 30 exit, stressing
that nothing would change for customers and that the bank remained committed
to its turnaround plan, which includes a major push to win new retail banking
clients and an ambitious digitalisation drive.
“Commerzbank’s activities will in no way be influenced by the fact that it
appears in one index or another,” CEO Martin Zielke has said.
But analysts say the future could well belong to fintechs.
“Even if Commerzbank and Deutsche Bank offered the same products as
fintechs, the big banks would always have to deal with frighteningly high
costs” like personnel expenses, said Rainer Haselmann, a finance professor at
Frankfurt’s Goethe University.
“Nimble fintechs will have less trouble growing than banking dinosaurs.”
BSS/AFP/HR/0930