German banks 'facing closure'

Germany's banks will be dragged into consolidation and forced to cut costs in the wake of the global financial crisis, analysts say.

They predict that many Landesbanks will go to the wall in the conflagration sweeping through the banking sector.

The recent Commerzbank takeover of Dresdner was the watershed when expansionism gave way to consolidation, they added, and the focus will turn inward, not outward.

Analyst Gene Pettit said: "In five years' time, Deutsche Bank may be the only German bank left with a bulge-bracket international banking presence. What this means for the profitability of German banks is unclear."

Another analyst, Joachim Messner, says EU edicts banning lavish state subsidies for the banks will force many of them to merge within the next three years.

Three German banks have already been almost sunk by the subprime crisis, the most recent being Hypo Real Estate.