Commerzbank’s ( CBKG.F ) $14.4 billion purchase of Dresdner Bank from insurer Allianz ( AZ ) makes perfect sense, but won’t do much to solve the underlying problem facing private-sector banks in Germany, namely competition from savings banks that enjoy a de facto government subsidy. The German banking market is not a level playing field and Commerzbank-Dresdner won’t make it noticeably more level. When consumers and businesses in Germany need money, they still turn most often to government-controlled Sparkassen and Landesbanks. The public savings banks account for three-quarters of lending, which isn’t surprising. Their government backing gives them access to better credit ratings and cheaper money than their modest profits would normally justify. As a January report by ratings agency Moody’s points out (the report is available, ironically enough, on the Sparkassen Association web site ) the public banks are overstaffed and their profitability is low by international standards ...
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