Den Jyske Sparekasse - en fusion med Sparekassen Østjylland

Student thesis: Master thesis (including HD thesis)

  • Christine Aagaard
My assignment investigates the question whether a merger with Sparekassen Østjylland (SØ) would present a viable solution to Den Jyske Sparekasse (DJS).
In my preface I introduce both saving banks with the scope of ascertaining if they are compat-ible in terms of values, market segments and organizational structure.
As they both prove to be a good match in the listed respects, I specify a number of criteria for the future set-up of their organisation.
I decide to let the merged saving bank continue under the name of “Den Jyske Sparekasse” and I keep its present manager, Claus Petersen, in the executive position.
I review a number of key figures for the two saving banks to identify their strong and weak points with the objective of letting the merger make room for the best strengths of both organ-isations.
My financial analysis profiles two saving banks that were just as severely affected by the fi-nancial crisis 2008-2010 as all other banks in Denmark. Whereas DJS increased its volume through mergers, SØ went for organic growth. To SØ this entailed huge challenges in adapt-ing costs to profit and SØ’s solvency was put under severe pressure.
Another finding is that both saving banks are much exposed to agriculture and the real estate market, which have both historically proven to be pretty risky segments, and accordingly I have had to formulate a number of requirements for the merger.
One of my prerequisites is that the saving banks must have made the necessary depreciations over the years prior to the merger in order to ensure that future depreciations can be kept on a reasonable level. Moreover, the merger is expected to entail some cost-savings in term of head counts. Once these conditions are met, the merged saving bank will start generating profit already in 2011, which will consolidate its solvency and probably also imply cheaper funding costs.
DJS’s solvency comprises a large share of equity which means that the solvency of the merged saving bank will be able to retain a reasonable level even without including supplementary capital.
Both saving banks have taken out government guaranteed loans that are due to expire in 2013. From experience we know that other parties merging have obtained an extension of their gov-ernment guarantees, and assuming that this will also be the case in the studied merger, the cash-position of the merged saving bank should be long-term secured.
My assignment therefore concludes that if the specified conditions are met, a merger with SØ would be quite attractive to DJS.
Publication date26 Apr 2012
Number of pages94
ID: 62730248