Just weeks before Wirecard collapsed, a tiny German bank made a big bet on Markus Braun.

With investors still reeling from the findings of a special audit into Wirecard’s accounting, Oldenburgische Landesbank (OLB) replaced Deutsche Bank as a key lender to Mr Braun, the then chief executive of the payments company, its public face and biggest shareholder.

The decision by OLB, whose headquarters are nestled in the sleepy university town of Oldenburg in north-west Germany, is emblematic of its transformation since a consortium including US private equity powerhouse Apollo acquired the bank from its longtime owner, insurance heavyweight Allianz, for €300m in 2017.

Once mocked as “Omas liebste Bank”, or “Grandma’s favourite bank”, because of its conservative approach, the new owners embarked on a series of mergers that have turned the once-regional lender into an institution with national ambitions and a bigger appetite for risk.

In the middle of May, and with Wirecard’s shares already under pressure, OLB signed a €120m loan agreement with Mr Braun, according to a document seen by the Financial Times. That sum was higher than OLB’s net profits for 2019 and equivalent to a tenth of its total common equity tier one.

OLB was once known for its conservative approach but its new owners turned it into an institution with national ambitions and a bigger appetite for risk © picture alliance / Bildagentur-o

“OLB these days has a business model that rests on a high appetite for risk,” said Gunter Dunkel, a senior financier with decades of experience in northern Germany and former chief executive of NordLB.

Over the past three years, OLB’s balance sheet has ballooned by more than a third while its net profits jumped fourfold. Although the bank‘s retail business still has 126 branches and generates half its revenues, 20 per cent now comes from specialised lending such as financing takeovers, commercial real estate and shipping. The remainder is derived from traditional commercial banking for corporate clients.

OLB’s return on equity shot up fivefold to 10.4 per cent last year, making it one of the few German banks to earn its cost of capital, which analysts estimate at about 10 per cent. Apollo declined to comment.

By lending to Mr Braun, OLB was stepping into the shoes of Deutsche Bank, Germany’s biggest lender. Deutsche had lent the Austrian executive €150m in late 2017, accepting half his seven per cent stake in Wirecard as collateral.

But after allegations of accounting fraud were repeatedly raised by whistleblowers and reported by the Financial Times, Deutsche Bank grew increasingly uneasy with the loan and decided not to renew it, according to people familiar with the matter. Deutsche Bank declined to comment.

As it took on the exposure to Wirecard’s embattled chief executive, OLB wanted more than Mr Braun’s shares as collateral. The 50-year-old also pledged two houses he owned in Vienna and one in the Austrian ski resort Kitzbühel as additional collateral, according to the document seen by the Financial Times. The houses were worth €30m between them.

In a statement, OLB said it granted “MB Beteiligungsgesellschaft mbH [Mr Braun’s family office] a margin loan for the redemption of existing liabilities that was collateralised by Wirecard shares and other assets.”

A lawyer representing Mr Braun told the Financial Times that the margin loan was moved from Deutsche Bank to avoid an enforced sale of the shares pledged as collateral, which Wirecard’s former chief executive considered undervalued.

“For this purpose, significantly worse credit conditions [for the new loan] were accepted,” the lawyer told the Financial Times.

Two weeks after securing the loan from OLB, Mr Braun spent €2.5m buying more Wirecard stock in a transaction now being examined by the German market regulator BaFin over potential violation of insider trading rules. Mr Braun’s purchase of additional shares for €2.5m was financed with borrowed money, according to his lawyer.

But even as Mr Braun bought more Wirecard stock, he eventually only drew on half of the €120m loan as he did not provide sufficient physical collateral, such as property, to tap more of it, said two people familiar with the agreement.

“The risk for OLB was actually quite manageable,” one of the people said, pointing to a scenario in which OLB’s loss would be limited to the €30m not protected by the value of Mr Braun’s properties in the event Wirecard’s shares became worthless.

As Wirecard began to implode in the middle of June, OLB managed to sell the shares in time to escape losses on the loan, people familiar with the matter said.

On June 18, Wirecard disclosed that €1.9bn in cash purportedly held in Asian bank accounts could not be verified by its longstanding auditor EY. Regulatory filings show that a 4.5 per cent stake owned by Mr Braun was sold on that day and the following one for an average price of €28 per share, according to Financial Times calculations based on the filings.

Days later, Mr Braun was arrested on suspicion of accounting fraud and market manipulation. He was released on bail and has always denied any wrongdoing.

On June 25, Wirecard filed for insolvency and shares in the company long regarded as a European tech champion closed the day at €3.53.

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