Alex. Brown

Deutsche Bank Sells U.S. Wealth Manager

Mr. Cryan gets the Warhol treatment. Source: AFP [M]
Mr. Cryan gets the Warhol treatment.
  • Why it matters

    Why it matters

    Deutsche Bank needs to reduce its expenses to return to sustainable profits.

  • Facts

    Facts

    • John Cryan came in as a new head of the bank in July after shareholders lost confidence in the two previous co-chief executives.
    • Mr. Cryan announced a restructuring program in October to trim operations, lower costs and increase its profitability.
    • Deutsche Bank has faced record fines this year and is still involved in hundreds of legal cases.
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    Audio

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Step by step, Deutsche Bank’s Co-Chief Executive John Cryan is following through on his big plan to reorganize and streamline Germany’s largest bank, an undertaking that will trim 35,000 jobs and operations around the world.

The German bank agreed to sell a U.S. wealth management business, formerly called Alex. Brown, to a Florida rival, Raymond James. Raymond James will pay $20 million to take over the operations from Deutsche Bank and cover “integration-related expenses,” according to a statement.

The unit, which Deutsche Bank had called “Private Client Services,” manages $50 billion in assets and has revenue of $300 million a year, Raymond James said.

Deutsche Bank’s other U.S. private banking operations will remain part of Deutsche Bank. Alex. Brown was part of the Banks’s Deutsche Asset & Wealth Management unit, which globally manages $1.2 trillion worth of assets.

“This (divestment) is a small step. Other things are more important, for instance dealing with the many lawsuits it faces.”

Dirk Becker, Analyst, Kepler Cheuvreux

“This is an operation where Deutsche Bank was hardly making a profit, perhaps break-even or not even that,” Dirk Becker, an analyst in Frankfurt at Kepler Cheuvreux, said, referring to Deutsche Bank’s U.S. wealth management operations.

The German bank said the divestment was part of its 2020 strategy to close operations in 10 countries, trim investment banking and end thousands of legal disputes that have weighed on the bank’s profitability for years.

 

DBCEONorthAmerica-Paul Zimmerman-WireImage
Jacques Brand has been the CEO of Deutsche Bank in North America since 2012. Source: WireImage

 

“This (divestment) is a small step. Other things are more important, for instance dealing with the many lawsuits it faces, reorganizing its IT operations and the whole cost structure which is not efficient enough,” Mr. Becker told Handelsblatt Global Edition. “Those are the big strategic challenges.”

Under former chief executives Joe Ackermann, who led the bank until 2012, and Anshu Jain and Jürgen Fitschen, who led the bank until earlier this year, Deutsche Bank had aggressively expanded in global investment banking.

But the strategy backfired following the financial crisis in 2008. A string of lawsuits and billion-dollar fines levied for illegal activity, such as the rigging of global benchmark interest rates with other international banks, forced Deutsche Bank to change course and top managers.

 

118 Deutsche Bank-01 WTB 2014

 

In Russia, Deutsche Bank is being investigated for violating U.S. sanctions and helping Russian clients laundering money. The German bank plans to jettison most of its Russian investment banking clients, Handelsblatt reported.

Deutsche Bank is also planning to sell its German retail banking subsidiary Postbank, which would further cut the bank’s global staff by 20,000 employees. Deutsche Bank employed 98,000 people at the end of 2014.

Deutsche Bank shares fell 0.9 percent to €23.23 in Frankfurt, and the DAX Index fell 0.3 percent on Friday morning. The bank stock has fallen 11 percent over the last year, compared with an 8 percent rise in the German blue-chip index.

Alex. Brown was founded in 1800 and acquired in 1999 by Deutsche Bank. The brokerage that serves wealthy clients has about 200 advisors in 16 U.S. locations, mostly on the East Coast, and in Texas and California.

Raymond James, which employs about 6,600 advisors and manages client assets worth $504 billion, said it expected to close the transaction in the third quarter of 2016.

 

Gilbert Kreijger is an editor with Handelsblatt Global Edition in Berlin, covering companies and markets. To contact the author:  kreijger@handelsblatt.com

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