Deutsche Bank AG will probably opt to exit all or part of its consumer banking operations in a strategy revamp to be announced as soon as this month, according to a person with knowledge of the matter.
The company is still weighing a third option of making deeper cuts to both investment and consumer banking divisions, though this is the management board’s least-favored course, according to the person with knowledge of discussions, who asked not to be identified because no decision has been made.
Co-Chief Executive Officers Anshu Jain and Juergen Fitschen, who took over three years ago, are leading a review to boost returns and capital levels. While some analysts said a sale of the entire consumer business to concentrate on investment banking would generate greater returns, others have said the move would deprive the bank of deposits it for funding.
The lender has been transparent that it’s reviewing and updating its strategy and that the company will communicate further in the second quarter after the decisions are made, said Michael Golden, a spokesman at Deutsche Bank.
Deutsche Bank’s management board is still debating models and the bank has met with regulators led by the European Central Bank since outlining the options to the supervisory board in March, according to the person. They have stress-tested them and analyzed whether the securities unit would have a sufficient business mix to cushion swings in profits if it did split entirely from consumer activities, said the person.
An official at the ECB in Frankfurt declined to comment.
The securities unit, the largest among European banks, would retain global transaction banking and wealth management operations, which hold some deposits that are typically considered less stable than consumer deposits.
The consumer unit had the lowest return on equity and the highest costs as a share of revenue of any of the company’s four units last year, filings show. Under the plan, the bank’s Postbank unit and the other consumer operations would be bundled together and sold to the public in 2017, the person said.
A stand-alone consumer business would probably have a higher credit rating than Deutsche Bank’s current rating, according to the person.
Germany’s Der Spiegel and Frankfurter Allgemeine Zeitung reported on Friday that the board reached a preliminary decision to sell the Postbank unit and that a proposal to split off the entire retail business didn’t win a majority backing.
A partial sale of retail banking activities, those of Postbank in Germany, is seen as generating lower returns for shareholders but also carrying less risk, said the person.
The ECB is open to both models, which would see some scaling back of the investment bank, and would communicate the capital buffers the units would likely need once the bank proceeds with the reorganization, said the person.
Deutsche Bank’s management is weighing the options ahead of a supervisory board meeting scheduled for April 24, said the person. A final decision may not be reached by then as management debates the risk and reward of the two scenarios, according to the person.