Deutsche Bank wins political support to be more like Goldman Sachs

Deutsche Bank is winning support from German politicians for a plan to transform the country's biggest bank into a company more like Goldman Sachs.

Nicholas Comfort and Birgit Jennen

Updated Mar 26, 2015 – 1.44pm, first published at 8.29am

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Deutsche Bank is winning support from German politicians for a plan to transform the country's biggest bank into a company more like Goldman Sachs Group.

That would be the result of an option the firm was weighing as it sought to bolster capital levels and profitability, said a person with knowledge of the matter, who asked to remain anonymous because the talks were confidential. Exiting retail banking to focus on global fund management and investment banking would cut fewer jobs and deliver the quickest boost to returns among three scenarios under review, said the person.

Deutsche Bank co-chief executive officers Anshu Jain and Juergen Fitschen are revamping their strategy after the stock fell 24 per cent last year, the most among the top investment banks. At stake for Germany, the world's third-biggest exporter, is maintaining a competitive advantage by having a domestic corporate and investment bank with global reach that can offer local companies access to capital markets.

Juergen Fitschen is revamping Deutsche Bank's strategy after the stock fell 24 per cent last year. Karim Sahib

"Deutsche Bank is Germany's only global player in banking," Michael Fuchs, the deputy parliamentary leader of Chancellor Angela Merkel's Christian Democratic Union said by phone from Berlin. "If they decide to restructure their business, we should support them."

Deutsche Bank executives briefed labour and shareholder representatives on the company's options at a meeting on Friday, said two people with knowledge of the matter.

The lender would still shrink its investment bank, which is Europe's largest, in all three scenarios it was considering, said one of the people. The bank might pare its interest- rate trading business and the prime finance activities that cater to hedge funds, the person said.

Ronald Weichert, a spokesman for Deutsche Bank in Frankfurt, declined to comment on which strategic options the bank was considering and on the comments made by German politicians. The company said on Friday that it would present the results of its strategy review in the second quarter. A spokesman for the Finance Ministry in Berlin also declined to comment.

Politicians might have an interest in Deutsche Bank's plan because Germany is its single biggest market, making up 34 per cent of the bank's 31.9 billion euros ($44.62 billion) of revenue last year and accounting for 46 per cent of its 98,138 staff at the end of December, company filings show.

If Deutsche Bank has concluded that it's "economically" better to sell its consumer unit, "we have to accept this", said Ingrid Arndt-Brauer, chairwoman of the parliamentary finance committee and a member of Merkel's Social Democratic Party coalition partners.

Goldman Sachs, which has outperformed Deutsche Bank in the past, could serve as a template for the German lender because it had shown that investors rewarded trading returns provided the bank was sufficiently capitalised, said Jefferies Group LLC analyst Omar Fall, who recommended investors buy Deutsche Bank shares.

The two banks already compete in asset management, investment banking and trading, but Goldman Sachs has stayed out of retail banking. By following the Goldman Sachs model, Deutsche Bank would lose funding from individuals' savings and become more dependent on deposits from wealth management clients. Unlike Goldman Sachs, Deutsche Bank also has a transaction banking unit that holds corporate cash.

Bloomberg