At the end of the month of April, Anshu Jain and Juergen Fitschen are expected to inform the shareholders about their new strategy for Germany’s largest bank. From the perspective of some analysts, the executives have three possibilities to bolster levels of capital and profitability to meet the requirements of the European Banking Authority without exception in the upcoming years. Mr. Fitschen has also expressed his concern about the current structure of the bank with the following words:
“Full-service bank does not mean to inevitably do everything for your customer, that is not our definition”
The three opportunities are as follows. The most discussed option is to exit the private clients business and focus on the investment banking and wealth management to become more like firms such as Goldman Sachs. This would result in an IPO of the Postbank in addition to the private clients business that runs under the Deutsche Bank name. Even though this division offers cheap funding for the bank, the profitability has lagged behind and a sale of the business would instead increase liquidity in the larger entity.
The second option is to merge the Postbank division with the other consumer divisions and to cut jobs in every division including the investment banking arm. An option that is considered as the deep integration of Postbank into the lender.
The third option for the managers is to sell Postbank, enabling them to shrink its risk-weighted assets by approximately 45 billion euros. Mr. Jain and Mr. Fitschen also pointed out that they want to shrink the investment banking division, in particular with regards to hedge funds.
From the aforementioned options, one can see that the managers are focused on generating shareholder value and make the bank more profitable. The German based lender is still trading at the lowest Price/Tangible Book Value ratio in comparison to its competitors, although it already surged 25% this year.
The new strategy will immediately influence the stock price and thus investors should keep a close eye on the announcements at the Annual General Meeting in May.