Deutsche Bank is restructuring its operations to become 'stronger and grow again' after a decision by the bank's management and supervisory boards on Sunday 'to reinforce the bank's roots in its home market of Germany and its position as a leading European bank with global reach'.
The bank plans to combine Postbank and Deutsche Bank's Private & Commercial clients business, float a minority stake of Deutsche Asset Management and create an integrated corporate and investment bank, and is seeking to raise €8bn to support the reorganisation. The issue is initially underwritten by Credit Suisse, Barclays, Goldman Sachs, BNP Paribas, Commerzbank, HSBC, Morgan Stanley and UniCredit. The subscription period is expected to start on March 21 and ends on April 6.
The bank's Global Markets (GM) division reported in February that net revenues in the full year 2016 were €9.3bn, a 14% decline versus 2015; while Corporate & Investment Banking (CIB) revenues in the full year 2016 declined 7% to €7.5bn.
Deutsche Bank remains a leading player in the structured products market and launched at the end of 2016 a $50bn business to house its hedge fund, risk premia and retail structured products within a new global investment solutions (GIS) division covering the different businesses which provide customised products. SRP data shows that Deutsche Bank was the fourth most active issuer of structured products in 2016 in Europe with over 174,000 products sold across markets and €4.2bn in sales. Year to date (YTD), the German bank is a top 10 issuer in Europe with a 5% market share across an estimated €560m in sales and 58 tranche based products brought to market. Including non-retail, flow and leverage products, Deutsche has a 6% market share across €595m in sales, YTD.
Recent changes at Deutsche structured products business include the appointment of Sean Flanagan as global head of equity structuring in London in addition to its global head of quantitative investment strategies (QIS), following the departure of Tom Leake, who has joined Goldman Sachs. In Europe, Ted Gonedes was appointed head of sales for Europe also based in London.
The German bank will bring all its activities under three business divisions 'to simplify its structure and better meet clients' needs' comprising a Private & Commercial Bank combining Postbank, Deutsche Bank's international Private & Commercial Clients business and the global Wealth Management business; Deutsche Asset Management, 'which should gain more operational independence through a partial IPO and be better positioned for growth'; and an integrated Corporate & Investment Bank, which will comprise the bank's corporate finance, global markets and global transaction banking businesses, 'aiming primarily for a corporate-client led business'.
"The capital increase will reinforce our financial strength substantially," said John Cryan, chief executive officer, in a statement. "The new three-pillar structure of our operating business should position us for significant growth, both in revenues and earnings."
Deutsche Bank and Postbank integration is aimed at rationalising central functions and technology platforms, while in wealth management the bank sees 'very attractive growth opportunities', in Germany and a sizeable presence in Europe, Middle East, North America and Asia Pacific (Apac).
Under the new structure, asset management remains an integral part of the bank which will launch a partial IPO to be completed within the next two years aimed at unleashing 'growth in Deutsche Asset Management's active, passive and alternatives business lines while accentuating the division's fiduciary role'.
With the combination of the corporate finance, global markets and global transaction banking businesses Deutsche to align the bank's product and sales efforts more effectively, 'enabling better service to clients and more focused resource allocation'.
'The bank intends to shift the focus in this business to corporate clients while retaining a strong, but more focused institutional client base'. The new integrated division, will offer services ranging from financing and payments to hedging and advisory.
The bank has also identified a pool of legacy assets within Global Markets of approximately €20bn in risk-weighted assets (RWA), excluding operational risk, which will be run down over an extended period of time and is currently estimated to represent a negative impact to the new CIB's post-tax return on tangible equity (RoTE) of around 200 basis points. The legacy assets pool will be managed separately and is targeted to be reduced to approximately €12bn euros of RWA by 2020.
The bank's commitment to its investment banking division explicitly includes its presence in the US and Apac. Additionally, Deutsche Bank will align certain parts of its technology and other overhead functions to its business divisions to increase accountability and reduce costs.
In addition, the German bank has appointed a new senior management team to manage the reorganisation. Jeffrey Urwin, currently head of the corporate & investment bank (ex-global markets) and the bank's US business, will retire from the management board after a transition period, but will continue to support the bank, regarding regulatory topics in the United States.
In addition to his position as CEO, John Cryan will assume responsibility for the bank's US business while Marcus Schenck, CFO, and Christian Sewing, CEO of Germany and head of private, wealth & commercial clients, have been appointed deputy CEOs with immediate effect. Marcus Schenck will join Garth Ritchie in leading the new corporate & investment bank in the course of the year; and Frank Strauss, currently CEO of Deutsche Postbank will head the new integrated PCB alongside Christian Sewing.
"After the difficult restructuring of recent years, the Supervisory Board is convinced that these strategic, financial and personnel measures provide a firm foundation for sustainable growth," said Paul Achleitner, chairman of the supervisory board, in a statement. "We are and will remain a bank rooted in Germany and Europe and with a sizeable presence in the global business with corporates, institutions and wealth management clients."
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