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Exclusive - Deutsche Bank weighs overhaul that could make deals easier: sources

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09/12/2018 | 07:16pm CET
FILE PHOTO: Christian Sewing, new CEO of Germany's Deutsche Bank, addresses the audience during the bank's annual meeting in Frankfurt

FRANKFURT (Reuters) - Deutsche Bank is considering an overhaul to loosen the bond between its retail and investment banks, according to three people with knowledge of the matter, a move that could make it easier to merge some or all of the group with rivals.

The German lender is examining creating a holding company structure, a step that would give it more flexibility to strike merger deals, as it seeks to regain its footing following years of heavy losses and multi-billion-dollar penalties.

The possibility is likely to be discussed at a meeting of management later this week in Hamburg, other people familiar with the matter said, as the bank's new chief executive, Christian Sewing, sets a new course for the struggling lender.

"I gravitate to the holding structure," said one of the people with direct knowledge of the debate.

Deutsche Bank declined to comment.

The structure, which would act as an umbrella over separate entities including its investment and retail banks, would see Deutsche following the example of U.S. rivals.

No decision, however, has yet been made, and while such an arrangement would bring potential advantages for the group, a number of questions about how it would work in practice, such as its tax impact, remain unanswered.

The debate to switch to the new structure comes at a time of upheaval for Deutsche.

Sewing was propelled to the helm earlier this year to reverse three consecutive years of losses and a falling share price. He has been on a mission to slim down the bank's international operations and promote steadier income streams in its home market of Germany.

As Deutsche's fortunes have declined, speculation of a possible merger has risen. Deutsche's cross-town rival Commerzbank is mentioned as the most likely candidate.

The German government, which owns a 15 percent stake in Commerzbank, has recently voiced the need for a strong German banking industry to support companies in the nation's export-led economy. That has stoked speculation it could engineer a merger.

Executives at both banks have privately talked down the chances of a merger anytime soon, saying the banks would need to overhaul their operations and restore profitability first.

While the holding structure could simplify potential mergers and acquisitions, giving flexibility in integrating a rival business, it has other benefits.

One of the people said it could shore up confidence in the investment bank by possibly making it cheaper to obtain finance if the holding company were to relieve it of some of the financial burden.

Regulators in the United States, UK and Switzerland also tend to favour the bank holding company structure, in part because it can help with the winding up of a troubled bank.

There has been a push since the financial crash to make banks easier to break up, lowering the risk that the problems of a troubled investment bank, for instance, could spill over onto ordinary savers.

About 90 percent of U.S. banks, including Citigroup and JPMorgan Chase, operate as holding companies, according to the U.S. Federal Reserve.

(Additional reporting by Arno Schuetze; Editing by Mark Potter)

By Andreas Framke, Tom Sims and John O'Donnell

Stocks treated in this article : Deutsche Bank, Commerzbank
Stocks mentioned in the article
ChangeLast1st jan.
COMMERZBANK -1.40% 8.078 Delayed Quote.-34.48%
DEUTSCHE BANK -0.05% 8.602 Delayed Quote.-45.79%
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Financials (€)
Sales 2018 8 809 M
EBIT 2018 1 546 M
Net income 2018 928 M
Debt 2018 -
Yield 2018 2,39%
P/E ratio 2018 11,02
P/E ratio 2019 9,95
Capi. / Sales 2018 1,16x
Capi. / Sales 2019 1,16x
Capitalization 10 261 M
Duration : Period :
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Technical analysis trends COMMERZBANK
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus HOLD
Number of Analysts 27
Average target price 10,3 €
Spread / Average Target 25%
EPS Revisions
Martin Zielke Chairman-Management Board
Stefan Schmittmann Chairman-Supervisory Board
Frank Annuscheit Chief Operating Officer
Stephan Engels Chief Financial Officer
Uwe Tschäge Vice Chairman-Supervisory Board
Sector and Competitors
1st jan.Capitalization (M$)
COMMERZBANK-34.48%11 634
BANK OF AMERICA-7.83%273 816
WELLS FARGO-12.94%248 637