In view of the current flow of news, one might think that the German banking sector is suddenly highly attractive. Strategic and financial investors are buying German banks. Foreign banks want to open German offices or launch digital retail banks. J.P. Morgan in the US, BBVA in Spain, Mediobanca in Italy and ABN Amro in the Netherlands – they have all recently shown a conspicuous interest in the German banking market. Why is that?

The German banking market is brutal. On the supply side, it is overcrowded with Volksbanks, Raiffeisenbanks, Savings Banks, Landesbanks, private banks, universal banks, direct banks and neobanks, all of which are competing for customers. And the German bank customer is not exactly the prototype for the modern banking service consumer. Yes, the whole world envies us for the German middle class. But take away the German retail customer's cash or Girocard and swap both for digital payment solutions, or try to swap their home loan and savings contract for a share savings plan– and a bank will quickly find out where the limits of what is possible lie.

Nevertheless, J.P. Morgan will launch the digital retail bank Chase in Berlin. BBVA of Spain has also announced that it will enter the market next year, competing with the Dutch bank ING Deutschland and the BayernLB subsidiary DKB. These are currently the two largest direct banks. There must be a reason why J.P. Morgan and BBVA think they have a chance in the German retail market. Both will have analysed the market, and clearly think that the existing digital services offering of German banks can be beaten.

The situation is slightly different in asset management, where ABN Amro is currently emerging as a major consolidator. They have already acquired the private bank Hauck Aufhäuser Lampe for 672 million euros in order to merge with Bethmann Bank. ABN Amro is also rumoured to be interested in Trinkaus & Burkhardt from HSBC. This could create the third largest asset management bank in Germany after Deutsche Bank and Commerzbank. Consolidation among asset managers makes sense, as the sector is under intense cost and investment pressure. Size and economies of scale are everything in this business.

This makes life difficult for smaller retail banks, and explains ABN Amro's German shopping spree. But where are Commerzbank and Deutsche Bank in the consolidation process? They are mainly preoccupied internally with themselves. Commerzbank has shown with its asset management deals that it can only manage small acquisitions, if at all, and Deutsche Bank is struggling with Postbank on several fronts. It recently reported a quarterly loss due to an unexpected provision it had to make for an age-old legal dispute involving Postbank. German banks also appear anything but untouchable in asset management these days.

However, foreign banks are not only focussing on the retail customer and asset management business. They are also sensing opportunities with corporate clients. Mediobanca has just announced that it is reopening an office in Frankfurt to offer corporate finance advice to SMEs. J.P. Morgen is not only planning a direct bank based in Berlin, but is also opening an office in Munich. The focus there will be on asset management and corporate client business.

And then there are foreign financial investors. The most recent example is Aareal Bank, which was delisted from the stock exchange by a consortium led by Advent, Centerbridge and the Canadian pension fund (CPPIB). However, they were less interested in the German banking market than in the IT subsidiary Aareon, which they sold immediately after the takeover. The German banking market has therefore not become more attractive recently. The German banks simply appear weaker.