In the United States, debates are underway about whether to split up several large banks.
Critics ask whether it would be better for the shareholders of JP Morgan Chase or Citigroup if the banks were dismantled. The difference between each bank’s market value and asset value are solid arguments in favor of break-ups.
The market value of Citigroup, for example, has been at about 75 percent of its asset value for years. This means one of two things: Either the bank is not meaningfully applying its own capital or is keeping risks hidden and secret.
Deutsche Bank’s co-chief executives, Anshu Jain and Jürgen Fitschen, should dust off the words “shareholder value" that seem to have been long forgotten.
UBS delivers the opposite example in Switzerland: The bank’s market value has long exceeded asset value considerably. The market is signalizing its trust that the bank is in correct alignment and will provide future profit growth.
Now let’s look at Deutsche Bank.
The stock market decides our largest credit institution has a market value of around half of its asset value. If Deutsche Bank were an American financial group, a public insurrection would have erupted long ago. In Germany, however, shareholders are as meek as lambs.
It’s about time Deutsche Bank’s German shareholders staged a revolt – and get more involved in the debate about the bank’s strategy.
Without shareholder pressure, the discussion can go in the wrong direction.
Deutsche Bank’s longtime tradition is not to care too much about the interests of its shareholders.
Even before the big financial crisis when profits were good, the bank’s market valuation was still low.
And apart from paying the occassional lip service, the bank’s leadership under Josef Ackermann didn’t take much care of its stockholders. All it did was occassionally publish some decent numbers.
How can Deutsche Bank significantly raise its value for its approximately 600,000 shareholders in the short, middle and long term?
And what business model, what leadership team does it need, to reach this goal? Those two big questions belong in the center of the strategy debate.
Deutsche Bank’s co-chief executives, Anshu Jain and Jürgen Fitschen, should dust off the words “shareholder value” that seem to have been long forgotten at the bank’s Frankfurt HQ.
The size of executive bonuses should depend on the amount of dividends and price advances the bank leaders deliver. Therefore, the question in the United States should also be asked in Germany: Is the sum of the parts worth more than the whole?
Bernd Zeisemer can be reached at: email@example.com