The message to Deutsche Bank is clear: If it is going to sell its retail subsidiary Postbank, it should do so to a European partner.
The verdict was delivered after talks between Germany’s biggest bank and officials at the country’s Chancellery and Finance Ministry. Jürgen Fitschen and Paul Achleitner, the bank’s co-CEO and chairman, were told that the government supported Deutsche Bank’s planned realignment strategy, but that the sale of Postbank could be a sticking point.
It is only a request, not an explicit demand to which the bank would be bound. But it isn’t easy to ignore. “For Deutsche Bank, this all but rules out the involvement of a bank or financial investor from outside the E.U., such as from China, India or Russia,” say insiders at Deutsche Bank.
Finance ministry officials stress that the government did not make “any specific demands” on Deutsche Bank. According to government insiders, this is ultimately the company’s decision and not that of lawmakers.
The government’s involvement is not unusual. In recent years, the Chancellery and finance ministry have repeatedly contributed their ideas on the restructuring of the German banking sector. This was the case when Deutsche Bank first invested in Postbank in 2008, and when Dresdner Bank was sold to Commerzbank, Germany’s second-largest bank, in the same year, just before the bankruptcy of American investment bank Lehman Brothers.
It is quite possible that Deutsche Bank's top management will ignore the government's concerns.
And when Commerzbank needed billions in fresh capital after the financial crisis, the government expressed objections to participation by non-European investors and, in the end, contributed billions to stabilize the bank.
For months the two co-CEOs of Deutsche Bank, Mr. Fitschen and Anshu Jain, have been fine-tuning a new strategy to overcome the bank’s chronically poor returns. There are indications that a majority of the executive board prefers a model involving the sale or equity placement of Postbank, combined with a bigger austerity package.
The model is based on the principle of caution. Unloading Deutsche Bank’s majority share in Postbank, which it acquired only five years ago, is the less radical of two possible strategies still in the running. The other one is a complete spinoff of the entire retail banking business. To add a bit of spice to the decision, Postbank has been blighted by strikes in the past few months.
Only a month ago, four executive board members favored dividing the bank into a commercial bank focused on investment banking and management, and a retail banking business. More recently, however, Mr. Jain and Mr. Fitschen have become skeptical of splitting the bank into two.
They fear that the commercial bank would have trouble securing financing, and that the lack of access to branches could create problems for the investment banking business. In addition, big customers had told management that they preferred a universal bank.
The board hopes that employee representatives on the supervisory (non-executive) board will abandon their objections to a sale of Postbank. The supervisory board was still overwhelmingly in favor of the more radical model in March, but then board members were convinced by the argument that a complete split would lead to more potential job cuts.
“No matter which model is used, we will support the one that costs the fewest jobs,” says an employee representative on the supervisory board. A large austerity program is expected in any case, including in the investment bank.
Many major investors, however, prefer a big split. According to a survey by Autonomous Research, a London-based financial research provider, 48 percent of the world’s largest investors prefer splitting the bank, while only 29 percent favor the softer option involving the sale of Postbank. Reports that only a minor solution was in the offing promptly triggered a 3-percent drop in the share price on Friday.
A Deutsche Bank spokesman stressed that no decision had been reached yet. Handelsblatt has learned that the executive board will meet again this week to discuss the issue. A final decision will probably be made in an extraordinary meeting of the supervisory board on April 24.
It is quite possible that Deutsche Bank’s top management will ignore the government’s concerns. After all, the bank – partly in the interest of shareholders – wants to make as much money as possible from a sale of Postbank. According to financial circles, Chinese banks, in addition to Spanish bank Santander and France’s BNP, are considered potential buyers.
Postbank employees fear a sale to Santander would lead to the biggest cutbacks, says a top manager at the affiliated bank, noting that it would be better to sell it to a bank that currently lacks a branch network in Germany. In other words, Postbank employees do not necessarily share Berlin lawmakers’ desire for a European solution.
The decision is further complicated by the series of strikes by Postbank cashiers. After several temporary walkouts in the past three months, branch employees announced on Monday that they would be going on indefinite strike. The move comes after the Verdi union failed to reach an agreement with the bank on job guarantees and pay.
Verdi wants assurances that there will be no forced lay-offs until 2020 for all 9,500 employees at Postbank Filialbetrieb, the Postbank subsidiary that runs the bank’s 1,100 branches. The union also wants a 5 percent pay rise for branch employees, it said.
Sven Afhüppe is Handelsbaltt’s co-editor in chief, Laura de la Motte is a banking correspondent, Peter Köhler heads the paper’s banking team in Frankfurt and Daniel Schäfer is head of the finance section. To contact the authors: email@example.com, delaMotte@handelsblatt.com, firstname.lastname@example.org, email@example.com