Airbus buys German lender to boost financing options

[PARIS] Airbus Group pressed ahead with post-Lehman plans to acquire its own banking licence, saying that it would buy small German lender Salzburg Muenchen Bank AG to boost its financing options.

The European aerospace group, formerly known as EADS, first disclosed the plans in 2012 after becoming concerned about where to place its large cash pile during the credit crisis.

Owning a banking licence would allow the world's second-largest aerospace group to deposit funds with the European Central Bank, as well as potentially draw on ECB funds.The plan follows in the footsteps of engineering companies such as Siemens, whose banking licenses have allowed it to tap the ECB's low-interest loan programme directly.

But in announcing the deal on Friday to buy Salzburg Muenchen Bank for an undisclosed sum, Airbus Group made plain its reasons had evolved - even though the option of using the eurozone central bank's coffers as a safe haven still stands.

"In principle, it does entitle the bank to liquidity from the ECB; however, Airbus Group has no need to access any liquidity of the ECB at this stage," a spokesman said. "Also, the bank will provide Airbus Group with the possibility to deposit funds directly with the ECB." Airbus Group identified other possible uses including carving out some flexibility in areas that it said were usually reserved for banks, such as providing liquidity to non-controlled joint ventures. The bank "may provide trade financing with suppliers, hedge book services, etc to support Airbus's production and delivery efforts," RBC Capital Markets analyst Rob Stallard said.

Both Airbus and rival Boeing, which has an aircraft financing arm called Boeing Capital Corp, are increasing production after a boom in aircraft orders. Both companies face concerns about the ability of the supply chain to keep up. The bank is, however, seen as unlikely to handle the airline customer financing carried out by Airbus and which is already well established through a Dublin subsidiary.

Industrial companies have traditionally been wary of the increased regulatory scrutiny - potentially involving tens of millions of euros in extra audits and management time or processes - that such a move would bring.

Airbus and Boeing both offer customer financing to support aircraft sales as a last resort - an activity that has recently rarely been used as Asian lenders step in to fill the gap left by once-dominant French banks.- Reuters