Deutsche Bank Still Profitable, Plans to Divest Postbank

Deutsche Bank will post a profit in the first quarter despite litigation costs of 1.5 billion euros ($1.61 billion), Germany's largest lender said on Wednesday.

"Deutsche Bank will be profitable in the first quarter and will report near record revenues," it said in a statement. The bank is due to report first quarter earnings on April 29.

Postbank Divestment

In the meantime, Deutsche Bank is preparing to divest its Postbank retail operation in the latest strategy overhaul by a big global bank in response to sluggish markets and a welter of tough new regulations since the financial crisis.

After months of reviewing its business, Deutsche's management board has whittled down its strategic options for boosting returns to two, both of which involve parting ways with Postbank, according to people familiar with the matter.

The divestment of Postbank, which has 1,100 branches and was bought for €6bn in stages from 2008, would be biggest strategic step yet for Deutsche under co-chief executives Anshu Jain and Jürgen Fitschen.

Under the first scenario being considered by the management board, Deutsche would sell shares in Postbank, 6 per cent of which remains listed, within the next 18 months and refocus its remaining own-brand retail business on more affluent clients.

At the same time, it would cut assets at its investment bank by €160bn – or roughly a fifth. The most likely areas of Deutsche's dominant investment bank to be reduced are the rates trading business and prime brokerage operation, which are both hit particularly hard by new Basel III capital rules.

Under the second more radical scenario being considered, Deutsche would split itself in to two separate legal entities. One would contain its investment banking, asset and wealth management and global transaction banking divisions. The second would contain all its retail businesses, which would be fully merged and then listed at some point over the next two and a half years.

Cina Coren
Cina Coren is a former Wall Street broker and financial advisor. She holds a Master's degree in Communications and spent many years writing for international news outlets and journalistic publications. Today, Cina spends most of her time writing internet articles and blogs, and reading various newspapers to stay on top of the news.