China, India

Deutsche Bank Begins Global Pullout

Farewell to China? Source: Bloomberg
Farewell to China?
  • Why it matters

    Why it matters

    Deutsche Bank’s exit from China and India mark one of the biggest signals yet that Germany’s largest bank will aggressively refocus its retail banking operations on Europe.

  • Facts

    Facts

    • Deutsche Bank owns nearly 19.9 percent of Hua Xia Bank, an investment currently valued at €3.3 billion, or $3.6 billion.
    • The Chinese investment is eating up too much of the bank’s capital, which regulators are pushing for major global banks to raise.
    • Pullbacks from other regions are being discussed. New co-chairman John Cryan will present his restructuring plans by the end of October.
  • Audio

    Audio

  • Pdf

It was a momentary blip that hardly anyone noticed: Deutsche Bank’s Internet site in June briefly put its stake in China’s Hua Xia Bank under the purview of Stefan Krause, the German bank’s go-to guy for unloading unwanted assets.

By July, the Chinese bank had disappeared from the website as quickly as it had appeared. A spokesman said Mr. Krause had taken over responsibility for Hua Xia because Rainer Neske, head of Deutsche’s retail division, had left the bank. No one should infer anything about Hua Xia’s future, the bank insisted at the time.

Two informed sources, however, have now confirmed to Handelsblatt that Deutsche Bank does, in fact, plan to sell its nearly 20-percent share of Hua Xia, a stake that is currently valued at about €3.3 billion, or about $3.6 billion, and would bring in much-needed cash.

Another source told Handelsblatt that Deutsche also plans to wind down its retail operations in India, where it has 17 branches. However, final approval of both moves has not yet been officially given by the bank’s management board.

The exit from Asia is part of a return to European retail banking, one source said, and will include the withdrawal from up to 12 other small countries around the world.

The impending sales of the Chinese stake and the Indian market retreat are the most tangible signs so far that Deutsche Bank is reducing its ambitions to become a full-service global bank, which became increasingly untenable as profits declined and shareholders raised pressure following the 2008 global financial crisis.

An exit from Asia would be the first major decision taken since John Cryan, the bank’s new chief executive, took over in July from former CEO Anshu Jain, although speculation that the bank would sell its Hua Xia stake had been rife for months.

Investors are hopeful Mr. Cryan, a cost-cutter as chief financial officer at Swiss bank UBS, will be more aggressive than his predecessors in Frankfurt had been at cutting out loss-making operations, shoring up the bank’s capital base, resolving legal disputes and restoring profitability.

Deutsche Bank’s share price rose 0.3 percent on opening Wednesday morning in Germany, though it fell back later in the day and was down 0.77 percent at 11:30 Central European Time.

While the bank’s more lucrative investment banking and asset management operations will remain global, the bank has taken a clear decision to scale down its commercial banking operations. In April, it announced the sale of its German retail arm Postbank. Investors are now hoping this was just the first of many steps.

Want to keep reading?

Subscribe now or log in to read our coverage of Europe’s leading economy.