It is their back yard, so to speak, rich in historical ties; and their financial strength is awesome. There was indeed much rubbing of hands at the outset. Since then, however, matters have been appraised in a rather more sombre light. Instead of a gallop towards the Urals and beyond, the pace has been determinedly gentle and reflective.
It is accompanied by much tut- tutting at the gung-ho practices of some European - notably French - rivals. 'I ask myself if they can add up, and since presumably they can it must be that, as state banks, they do not have to,' says Georg Krupp, the member of Deutsche Bank's board responsible for Eastern Europe.
A contributing factor to the German banks' caution regarding Eastern Europe was the early experiences in eastern Germany. The big three, Deutsche, Dresdner and Commerzbank, leapt over there with wildly optimistic ideas of how much could be achieved in a short time. 'What we learned in eastern Germany reinforced our scepticism - it showed just how enormous the problems will be,' Mr Krupp says.
Compared with the transfers being poured into eastern Germany, Western aid for Eastern Europe is a drop in the ocean. 'We have to be clear about one thing: of a potential 400 million clients throughout Eastern Europe, we can only establish a customer relationship with those who can earn the necessary foreign exchange from their exports,' Mr Krupp warns.
But beyond nurturing a general prudence, eastern Germany also provided some specific lessons for use further east. One of these, according to Jan Baechle, area manager of Commerzbank's Eastern European operations, was: go it alone; stay well clear of local banks. Another emphasised the vital importance of training.
Of the big three, the biggest, Deutsche, has proved the most cautious. It has limited itself to opening up representative offices, even in the most promising places such as the Czech Republic and Hungary.
It has chosen a slow build-up towards eventual operative units. 'When we come, we shall have an institution able from the beginning to offer all services, because whoever offers a broad range will have the most interesting business prospects,' Mr Krupp says. Deutsche Bank's motto here is, 'Start second, finish first.'
Dresdner Bank, by contrast, has been much quicker off the mark, not only opening a relatively extensive network of representative offices in places like Alma Ata and Kiev, but also subsidiaries in Prague and Budapest. Bernhard Walter, the member of Dresdner Bank's board in charge of Eastern Europe, says that because of the fast-changing economic and political environment, 'one should be prepared to decide now on long-term commitments'.
The hint of greater adventurism colouring Dresdner's approach is partly to do with its decision to spread the risks by sharing its Eastern European operations with Banque Nationale de Paris, with which it is forging closer links. Their next joint ventures will be a branch in St Petersburg and, perhaps by the end of this year, another in Moscow.
Commerzbank's strategy falls somewhere between those of its two bigger rivals - going in on its own, but already with a full branch in Prague and a subsidiary in Budapest.
'The most European states have in common today, apart from their socialist past, is their geography. Otherwise, each country is going its own way,' says Deutsche's Mr Krupp. There is, none the less, a breakdown into general categories on which all the banks agree.
The first and most promising category covers the reform states in Central Europe. The second covers the former Soviet Union, while the third, which has already slipped out of the pending tray into the waste paper basket, comprises such bankers' lost causes as Romania, Bulgaria and the former Yugoslavia.
The Czech Republic and Hungary occupy pride of place in the first category. 'The situation is optimistic here; all the pre-conditions are there for plugging into the Western economy,' Mr Krupp says.
Poland, by contrast, remains handicapped by its moratorium on debt servicing. Despite their newness, Commerzbank's branches in Prague and Budapest are performing well, Mr Baechle says. 'If things continue this way, we can expect over the next five years branches there with 50 to 100 people each and credit volumes of around DM1bn.'
In true German relationship banking style, Deutsche, Dresdner and Commerzbank have followed their clients. About 500 German firms are already operating in Hungary and the Czech Republic. Germany is the number one trading partner of the three Central European countries - trading volume overall has doubled since 1989 to some DM40bn in 1992.
'Financing that trade is our main activity,' Mr Baechle says. 'It is fee- bearing, no risk, and we get liquidity. The Germans have a dominant position because of their international network and state-of-the-art payments system.'
The Czech Republic in particular, and to a lesser extent Hungary, are also seen as having great potential as production centres for German firms escaping high costs at home. 'This exodus has only really just begun - we are looking at a new page in the book of the international division of labour,' Mr Baechle says.
At Deutsche, Mr Krupp is already peering farther eastwards, at the not so distant day when the Czech Republic's cost advantages start to erode. Belarus and Ukraine, for all their current political uncertainties, are his tips for Germany's low-cost producers of the future.
But once they begin talking about this second category of countries, the former Soviet Union, the German bankers' caution risks slipping into gloom. And Russia is usually the cause of it; so big, so difficult to grasp, so chaotic, they say. While Deutsche cannot yet imagine the day when it could upgrade its representative office in Moscow to a branch, Dresdner, with BNP, is planning to move more quickly, in St Petersburg and then Moscow.
There are many German joint-ventures in the St Petersburg region, and Dresdner has also managed to plug itself in to the local defence industry. It is helping companies convert from total dependence on defence, and trying to find Western investors. 'It is a long process, and could go on for years,' Mr Walter says. 'Those who want to make huge profits here quickly should not even try to go in.'
The obsession with the Russian federation, particularly among American and British banks, is a mistake, according to Mr Krupp. While it must not be neglected, there are more interesting things happening elsewhere, he says, in Kazakhstan, Uzbekistan and Tajikistan. They offer much of what the Russian federation fails to: stable politics, a manageable size, and intelligent economic policies.
All the big German banks are investing heavily in training not just their own people for the slowly expanding eastern network, but also significant numbers from the local banks in places like Alma Ata. 'This is not altruism. We are establishing future relations with these banks,' Mr Krupp says.Reuse content