Deutsche Bank Mulling ‘Creative’ Postbank Exit, Cryan Saysby
Cryan says Postbank IPO wouldn’t be ‘attractive’ right now
Deutsche Bank may post another loss in 2016, Cryan says
Deutsche Bank AG, Germany’s biggest bank, is considering “creative” solutions to exit its Deutsche Postbank AG consumer unit, with plans for an initial public offering on hold, Chief Executive Officer John Cryan said.
“We could proceed with an IPO -- unfortunately we don’t want to right now because I don’t think the price that we would get would be attractive for our shareholders,” Cryan, 55, said at a conference in New York on Tuesday. “We’re either hoping for a market recovery there or looking for slightly more creative ways to exit the division. But the bank is for sale -- so if you know anyone who wants to buy a German retail bank, let me know.”
Deutsche Bank, which houses Europe’s largest investment bank, is seeking to restore investor confidence with a plan to boost capital levels and profitability by selling Postbank and shrinking the securities unit. Cryan, who took over as sole CEO earlier this month, said at the conference that while most of the restructuring will be done by the end of the year, the lender has to “step up attention to our trading businesses” given the current market environment, with client volumes “clearly down.”
The shares have dropped about 27 percent this year, making them the seventh-worst performer on the 39 member Bloomberg Europe Banks and Financial Services Index, which lost 16 percent.
The Postbank sale was a key part of Cryan’s plans to raise capital buffers, hurt by fines tied to past misconduct and restructuring costs. Deutsche Bank has said it plans to sell a majority stake in the business by the end of next year. The unit reported a 8 percent increase in pretax profit to 122 million euros ($136 million) in the first quarter from a year earlier.
Deutsche Bank didn’t expect to “make a lot of money” from the sale of Postbank, with “virtually any price” seen helping bolster capital levels, according to the CEO.
“We’ve bought ourselves a bit of time, we anyway don’t really need to sell this until 2018,” Cryan said. “Then when the inflation comes through from Basel III in full force, it would be useful to have shed ourselves of that leverage and those risk-weighted assets.”
Deutsche Bank acquired the Postbank business in 2010 as part of former CEO Josef Ackermann’s plan to reduce its dependence on investment banking. The company wasn’t able to fully tap synergies with the unit and limits on leverage made its mortgage business less attractive, according to the bank.
While Cryan reiterated that Deutsche Bank may post a loss in 2016, he said he’s “fairly confident” that the lender will be able to reach its goal for winding down assets at its non-core unit before the end of the year.