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 Only two management board members support dumping all retail
activities, with the other six favoring just selling Postbank, the
sources told Reuters, speaking on condition of anonymity as the
matter is not public. The bank will decide on the hotly-debated
overhaul as soon as next week, they added.
Seven years after the financial crisis started, Deutsche is looking
to overhaul its business after falling far short of its
return-on-equity targets and suffering a string of regulatory fines
and legal challenges.
The choice to keep most retail operations and offload only Postbank,
which Deutsche bought in steps for about 6 billion euros ($6.5
billion) starting in 2008, is a concession to credit rating agencies
concerned a complete retail exit would raise Deutsche’s risk profile
and cost of funding, the sources said.
It’s also a nod to concerns in Berlin that a total retail exit would
see the country’s flagship bank lose touch with its home market, the
sources said. Deutsche's own-brand retail chain serves some 8.5
million Germans through around 730 branches.
By selling Postbank, Deutsche aims to raise capital and retreat from
the low-profit battlefield that is German retail banking, dominated
by savings and cooperative banks.
NOBODY SPARED
Deep cuts will accompany any overhaul plan, including closing up to
a third of the group’s remaining German branches, the sources said,
in what would be a dramatic retreat from main street.
Postbank, which serves 14 million clients from 1,100 branches
integrated into the postal system, would be sold via the stock
market, placed with a strategic investor or perhaps even with a
private equity specialist, the sources said.
Postbank has burdened Deutsche with restructuring costs and
write-offs since its purchase. Deutsche has invested heavily in
technology upgrades to both retail brands in an attempt to cut
operating costs but progress has been slow.
The challenge to any Postbank sale would be finding a buyer willing
to pay enough to allow Deutsche to avoid billions in writedowns.
Previously, sources had told Reuters a plan to sell all of
Deutsche's retail banking business to focus on investment and
commercial banking was the favored route, after the bank's
supervisory board reviewed up to five options at a meeting on March
20.
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Whether Deutsche ditches retail entirely, thereby abandoning its
"universal" model, or just opts to cut loose Postbank, it will
represent an about-face for a group that has boasted how its wide
retail activities offer a stabilizing counterweight to volatile
investment banking and capital markets activities.
All the models considered by management also envisage taking a knife
to activities in the investment bank that are low-profit or overly
burdensome in terms of their regulatory capital requirements, the
sources said.
The bank's supervisory board is expected to review proposals at an
extraordinary meeting on April 24 and grill management on details
before signing off on any plans ahead of its quarterly results
scheduled for April 29.
The group has spent 7 billion euros in the past three years on fines
and settlements and another 4 billion on restructuring, including
the integration of Postbank.
Those costs have contributed to Deutsche Bank falling short of its
own goals, with group return on equity of 3 percent in 2014 far from
a 2015 target of 12 percent.
A spokesman for the bank declined to comment on options, except to
say the bank still aimed to conclude its deliberations by the end of
June.
(Additional reporting by Thomas Atkins; Editing by Mark Potter)
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