Deutsche Bank has received its first offer for its retail network Postbank from Austria’s Bawag on Friday, according to industry circles.
Bawag is considering buying Postbank and its majority owner, Cerberus, a financial investor from the United States, signaled its interest to Deutsche Bank, an insider told Handelsblatt.
Manager Magazine reported that Bawag would be prepared to pay up to €4.5 billion, or $5.1 billion for Postbank.
The sum is significantly less than the €6.3 billion Deutsche Bank paid for the retail network in 2008.
Deutsche Bank initially declined to comment on the matter but referred to previous statements that it was looking to sell off its stake in Postbank through the stock market.
In an interview with the Sunday newspaper Frankfurter Allgemeine Sonntagszeitung, the co-chief executive of Deutsche Bank, Jürgen Fitschen, said, “the stock market is our preferred option because we want a broad ownership structure,” perhaps hoping to obtain a higher price.
We have enough capital to fund organic and inorganic growth. Anas Abuzaakouk, Bawag chief financial officer
Bawag is a major bank based in Vienna and has a similar business model to Postbank; both deal with customers in post office branches. But with only 1.6 million customers, the Austrian bank has a much smaller network than Postbank, which has a customer base of 14 million.
Cerberus could not be reached to comment on this article. Bawag was unwilling to comment but a statement from the board at the weekend underlined that the bank would remain focused on its core Austrian business. A spokesperson told Handelsblatt that the shareholders were of course considering different purchase options, and that broadly speaking, a market shakeout was expected in the European banking sector.
Anas Abuzaakouk, Bawag’s chief financial officer, recently said the bank was eager to grow. “We have enough capital to fund organic and inorganic growth,” he said.
Deutsche Bank recently announced plans to sell Postbank by the end of 2016, in order to significantly shrink its balance sheet, as part of its Strategy 2020.
Deutsche acquired Postbank in 2008 but recently announced plans to sell the majority of its shares in 2016 and to wholly separate from the bank in 2017. However, some observers believe it may prove difficult for Deutsche Bank to find a buyer as Postbank’s business model is under pressure due to low interest rates.
As a centralized savings bank, Postbank is in difficulties because there is little to be earned in the difference between savings and credit interest rates. Furthermore, several long-running contracts prevent Postbank from achieving higher savings and making broader changes.
Deutsche Bank owns 95 percent of Postbank and values it at €6 billion; insiders however have said it might be difficult for Deutsche Bank to obtain this high a price and that a buyer might pay €2 billion less.
The plan to sell Postbank was a major part of Deutsche’s long-awaited restructuring. But overall the new strategy disappointed analysts and investors who hoped for a new vision for the bank beyond cost savings and cuts in the investment banking department.
Jürgen Fitschen and Anshu Jain, Deutsche Bank’s two co-chief executives, are under pressure for failing to achieve the goals they set during their first three years in post. Numerous legal issues, costing billions of euros, are one reason for this.
There is growing discontent among Deutsche Bank’s shareholders and there are rumors that at the bank’s annual general meeting this Thursday, some major shareholders will not approve the board’s actions.
ISS, the influential U.S. stakeholder advisory firm, recommended its shareholders vote against the two co-chief executives and other German advisory firms have given similar advice.
At most German shareholder meetings, members vote to exonerate the company’s top management in a referendum that is usually a formality. But it has become clear that growing dissatisfaction could lead to a vote of no confidence at the meeting of Deutsche Bank’s shareholders on Thursday.
In the case of a no-confidence vote, the bank’s supervisory board, the non-executive board which hires and fires chief executives and approves board decisions, would have the right to recall the chief executives for incompetence or dereliction of duty. But as the supervisory board also previously approved both the chief executives in their positions and their new strategy, this would call its competence into question too.
In this critical phase, last week Paul Achleitner, the head of Deutsche Bank’s supervisory board, avoided making a clear statement about the dual leaders. He said simply that “everyone can be replaced” in an interview with Wirtschaftswoche, a weekly magazine.
Mr. Achleitner told the Wall Street Journal that the bank would listen to shareholder concerns at the upcoming meeting, and that “The fact that it will likely be a controversial meeting is OK.”
In an interview with German Sunday newspaper FAS, the Deutsche Bank co-chiefs said they were not planning to step down. “The best thing that I can do is to solve the bank’s problems and optimize its performance,” Mr. Jain said. “This mission has yet to be completed.”
Mr. Fitschen, whose trial continues Monday over allegations of providing misleading evidence in court, also wants to continue as chief executive. He and other former managers are accused of giving misleading testimony involving the bankruptcy of Kirch media, a pioneer of paid TV in Germany.
The frustration among shareholders stems from the high fines announced in relation to the Libor scandal, and from the limitations of Deutsche Bank’s strategy.
Deutsche Bank will pay a record fine of $2.5 billion for its role in a rate-fixing scandal set by U.S. and U.K. regulators who said the bank’s executives deliberately manipulated the London Interbank Offered Rates, or Libor, which is a benchmark to set global interest rates. Deutsche Bank’s fine was higher than had been expected as regulators said the bank had failed to cooperate and had delayed their investigation.
Deutsche Bank has since expressed regret over the scandal and has strengthened internal controls. But according to the DSW German shareholders’ association, the bank has not substantially changed its corporate culture.
The range of different scandals in Deutsche Bank’s investment department may mean less support for the management than usual, Mr. Jain said. “But I’m sure that we have the support of the majority of the shareholders.”
Laura De La Motte is an editor at the Handelsblatt finance desk and a specialist banking correspondent. Hans-Peter Siebenhaar is Handelsblatt's Austria correspondent. Allison Williams contributed to this article. To contact the authors: [email protected], [email protected]