Deutsche Bank mulls over spin-off of asset management business

Deutsche Bank has been engulfed in crisis since news emerged last month of a US demand for a US$14 billion (S$19 billion) settlement over the sale of residential mortgage bonds that turned toxic and sparked the 2008 financial crisis.
Deutsche Bank has been engulfed in crisis since news emerged last month of a US demand for a US$14 billion (S$19 billion) settlement over the sale of residential mortgage bonds that turned toxic and sparked the 2008 financial crisis.PHOTO: BLOOMBERG

FRANKFURT • Deutsche Bank is working on a spin-off of its asset management business as one of several options to bolster its capital, following a multibillion-dollar fine in the United States, the Financial Times reported yesterday, citing people familiar with the matter.

Germany's biggest lender has not made a final decision about whether to float a minority stake in the unit, and any such move is unlikely before the first half of 2017, the paper said.

Deutsche Bank declined to comment on the report.

An initial public offering (IPO) would represent a partial or complete sale of the business that Deutsche Bank has long been reluctant to sell. It would, however, allow the lender to keep management control while raising €2 billion to €3 billion (S$3 billion to S$5 billion) of capital that would reduce the size of a potential rights issue.

Deutsche has been engulfed in crisis since news emerged last month of a US demand for a US$14 billion (S$19 billion) settlement over the sale of residential mortgage bonds that turned toxic and sparked the 2008 financial crisis.

Deutsche Bank chief executive John Cryan told staff last month that he had no plans to sell the asset management business, saying it is and will remain an essential part of the lender's business model.

The bank is holding informal talks with securities firms to explore options, including raising capital should mounting legal bills require it, people familiar with the matter told Bloomberg.

Senior advisers at top Wall Street firms are speaking to representatives of the German lender about ideas, including a share sale, said the people, who asked not to be identified because the plans are private.

The banks are offering to help underwrite a stock sale to raise about €5 billion should the bank need it, the people said.

That is about the maximum amount in discounted shares Deutsche Bank can sell without needing shareholder approval, if the firms decide to raise capital, the people said. The firm could also go to shareholders to request approval for more funds.

Some of Germany's biggest publicly traded companies are prepared to buy shares in Deutsche Bank to prop up the lender in the event of a potentially crippling legal fine in the US, German newspaper Handelsblatt reported on Thursday.

Some of the bank's biggest shareholders include the Qatari royal family, BlackRock and Norges Bank.

BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on October 08, 2016, with the headline 'Deutsche Bank mulls over spin-off of asset management business'. Print Edition | Subscribe