Deutsche Bank is considering a partial initial public offering (IPO) of its asset management unit as part of an overhaul following its record payout over toxic mortgages in the United States, several people close to the matter said Tuesday.
The deliberations are still at an early stage and no decisions have been made, the sources added. Prior to a such move, the unit would seek to get its main registration moved to Luxembourg, which has clear tax and regulation advantages, one of the sources said.
Deutsche Bank declined to comment.
The bank is expected to present a strategy update to investors in spring and after international banking supervisors reach a deal on new bank capital rules.
Germany’s biggest bank last week finalized a $7.2 billion U.S. settlement over the mortgage securities that soured in the 2008 financial crisis, giving it breathing space to refine its strategy.
According to analysts, Deutsche Bank may see its asset management arm, which includes its mainstay DWS retail asset management brand, valued at 8 billion euros in a potential IPO.
The unit posted a 7 percent rise in pretax profit to 549 million euros in the first nine months of 2016, accounting for almost a third of the group’s pretax profit of 1.6 billion euros.
It had 715 billion euros in assets under management as of September 2016.
Deutsche Bank investors have said in the past that they would prefer a partial sale of the asset management unit over a rights issue, cautioning that a such move would reduce the steady flow of earnings from the business.
The asset management unit has been touted as a potential divestment target at various times in the past. However, Deutsche Bank has always said that it would not shed the business.
Chief Executive John Cryan said last week at the gathering of policy makers and business executives in Davos that asset management remained “absolutely core.”
“People forget how big it is and it’s a very lovely steady stream of predictable profits and revenues for us, so we like it very much, so well keep that,” he said last week.
Deutsche’s capital plans will also determine whether Deutsche Bank will reintegrate its retail unit Postbank, which it had put up for sale to lift its capital ratios, but would prefer to keep, people close to the bank said last week.
Deutsche Bank has drastically cut 2016 staff bonuses.
A capital issue, however, is not Deutsche Bank’s base case plan, Cryan indicated last week.
“Our strong preference was not to raise fresh capital… but I know never to say never,” he said in Davos.
Separately, Deutsche Bank is expected to outline a slimming down of its core investment banking unit as part of its strategic review after a rapid expansion in the business since the 1990s.
Source: Reuters
