Frankfurt: A regulatory push to make Deutsche Bank AG easier to break up in a crisis has gained traction within the firm as the company weighs becoming more agile to merge all or parts of the company, according to people with knowledge of the discussions.
The bank has been encouraged to adopt a holding company structure, which would result in the creation of three largely independent core divisions overseen by a common management board and sharing stripped-down support functions, the people said, asking not to be identified as deliberations are private.
Deutsche Bank is still grappling with an investment bank that’s struggling to compete with peers and a retail division unable to make a substantial profit because of a bloated workforce and an over-banked local market. Chief Executive Officer Christian Sewing announced the bank’s fourth restructuring in three years in April, mostly focused on cuts to the investment bank, though has yet to convince investors of its merits after the share price dropped almost 40% this year.
A spokesman for Deutsche Bank declined to comment.
While Deutsche Bank’s top management doesn’t currently see the change as a top priority, many of the lender’s top executives also believe it could increase the bank’s strategic flexibility, several people said. Several representatives of large Deutsche Bank investors said they were not opposed to a more flexible structure.
Meanwhile, speculation about a potential merger with Commerzbank AG, Germany’s second-biggest listed lender, has resurfaced in recent weeks. The tie-up is seen as a preferred long-term option within the bank, Bloomberg reported in June.
Deutsche Bank is already taking steps toward a greater separation of its divisions. It sold shares in an initial public offering of its carved-out asset management arm in March and it’s also restructuring its German retail unit after merging two previously independent units into one. That will include moving back office staff into the division to make it more independent from the parent, two people said.
“The pressure to consolidate will rise significantly" in Europe, Sewing said in a speech to a conference in Frankfurt in early September without elaborating further. Frankfurt, where Deutsche Bank is headquartered, should play an active role if the European banking industry were to be reshaped, German Finance Minister Olaf Scholz suggested at the same conference.