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German fintech pushes Commerzbank out of DAX 30
FRANKFURT AM MAIN, Sept 6, 2018 (BSS/AFP) – Wirecard, a Bavarian start-up
specialised in online payments, has nudged German giant Commerzbank out of
the blue-chip DAX index, in the latest sign of plucky fintechs outshining
traditional lenders.
Frankfurt stock exchange operator Deutsche Boerse made the announcement
late Wednesday as part of its regular review of the composition of the DAX 30
index, based on the market capitalisation and trading volumes of Germany’s
top listed firms.
The change will take effect on September 24.
Commerzbank CEO Martin Zielke said it “of course, it is not welcome” that
Germany’s second-largest lender and a founding member of the prestigious DAX
club three decades ago has to move to the mid-size MDAX index.
“But nothing changes for our customers and our business.”
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, had been
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.
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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.
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.”
– 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 said it remained committed to its turnaround plan, which
includes a major push to win new retail banking clients and an ambitious
digitalisation drive.
“At the moment it is obviously the case that the market values fintechs
more highly than traditional banks,” Zielke said in a statement.
“This development shows that our strategy is the right one and spurs us on
to push ahead with the transformation into a digital enterprise.”
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/1045