Fri, Sep 14, 2018 - Page 10 News List

Deutsche Bank mulls holding company plan

REGULATORY HURDLES:Sources said that potential challenges facing a revamp would be organizational, burdening management and staff with restructuring

Bloomberg

Deutsche Bank AG is weighing a move to split its core businesses under a holding company, a measure that would make it easier to break up in a crisis and more agile in potential mergers, people with knowledge of the discussions said.

The bank has been encouraged by regulators to adopt the structure, which could create three largely independent core divisions overseen by common management, the people said, asking not to be identified as the deliberations are private.

Deutsche Bank’s investment bank is still struggling to compete with peers, while its retail division is unable to make a substantial profit in an overbanked market because of its bloated workforce.

Deutsche Bank chief executive officer Christian Sewing in April announced the bank’s fourth restructuring in three years, mostly focused on cuts to the investment bank, though he has yet to convince investors of the merits of the plan.

Deutsche Bank’s stock is down almost 40 percent this year.

A spokesman for Deutsche Bank declined to comment.

While top management does not see the change as a top priority, many executives believe it could increase the bank’s strategic flexibility, several people said.

Several representatives of large Deutsche Bank investors said they were not opposed to a more flexible structure, which could see the different units sharing some support functions.

Deutsche Bank has previously discussed turning itself into a holding company but decided against it, the people said.

Meanwhile, speculation about a potential merger with Commerzbank AG, the second-biggest listed lender in Germany, has resurfaced in recent weeks.

The tie-up is seen as a preferred long-term option within the bank, Bloomberg reported in June.

Considerations on potential deals are purely theoretical at present and no decision on any potential merger is imminent, the people said.

A tie-up with any bank, domestic or foreign, is unlikely to be announced this year, they said.

The change to a holding structure would face many regulatory difficulties, including finding ways to ensure the investment bank can still receive funding through the group and maintain its credit rating, two people said.

Another person said that the revaluation of assets, which might result in a tax burden, would be the biggest hurdle.

Other challenges to the potential structural revamp would be organizational, burdening management and staff with yet another restructuring while the other revamps are unfinished.

The lender would need to find ways to account for shared services, such as legal, marketing or compliance. It would also run the risk of creating duplicate roles — at a time when it is locked into an ambitious cost-cutting program — by reassigning shared services to the individual divisions, one person said.

Deutsche Bank’s shares opened 0.4 percent higher at 9.57 euros in Frankfurt yesterday, having risen slightly late on Wednesday when the news was first published.

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