Retail Banking Postbank's Breakaway Strategy

Postbank, the retail arm of Deutsche Bank, has recently axed free accounts for millions of customers. But ironically, it's a move to connect with clientele while prepping for independence, CEO Frank Strauss told Handelsblatt.
Postbank CEO at the Handelsblatt Banking Summit in Frankfurt on Thursday.

Postbank boss Frank Strauss is holding many discussions with customers lately. The bank just started charging fees for current accounts, and he says the reaction of many clients has been surprising. At the Handelsblatt Banking Summit, he spoke about a new era of service charges, penalty interest rates and the subsidiary's inevitable separation from Germany's biggest bank.

 

Handelsblatt: Postbank is getting a lot of headlines right now, not from anything you have done, but because of your parent company. Have you become the Deutsche Bank's plaything?

Frank Strauss: Deutsche Bank has always expressed a clear view on what it wants to do with Postbank.  Chairman of the board John Cryan said again yesterday that he wants to sell Postbank, and that has been the status for 18 months. Right from the beginning we knew that it would be a process prone to changes, and that we still had a whole list of issues to take care of. But we have already been through a similar process before, when we went public for the first time in 2004, and therefore we are well prepared. And that is why we don’t feel like a “plaything.”

But surely the waiting game about when the sales process will begin must be unsettling?

It’s clear that when you start a process you want to complete it at some point. So, of course, a long wait is not exactly comfortable. But it is also quite clear to us that as the seller, Deutsche Bank has its own objectives. That’s why we are all realists at Postbank. We are working consistently on decentralization, our independence and our future sustainability. But we also see the situation on the capital markets. And that is why we fully understand that Deutsche Bank has to wait until it can obtain the price it wants.

Many industry players like John Cryan, for example, are calling for a consolidation of the banking sector. But the sale of Postbank is the exact opposite of consolidation. Is that logical?

That is a question you have to ask the seller. But of course it is a question of compatibility, and between Postbank and Deutsche Bank many things were indeed compatible. On the other hand, because of increased regulation and Deutsche Bank’s desired focus, it is probably not the ideal owner for Postbank. A separation is understandable, despite economies of scale in retail banking being attractive. With 14 million customers in the German market, we also aren’t small standing alone.

How do you explain to the German Financial Services Regulator, Bafin, that Postbank can be successful on its own?

What has happened at Postbank in the last six to seven years is already a fundamental change. The period with Deutsche Bank was a good period for us. We are much more focused and have increased our equity capital from 4.2 to 11.5 percent. I was also pleased that Fitch, which conducted our first credit rating in years last week, sees us as adequately capitalized because of our low-risk credit portfolio. In other words, with our business model and risk structure we represent an interesting and calculable investment in the German banking market.

Your new strategy focuses on customers. What did it focus on before?

As an industry, we got very involved with our environment and markets following the Lehman insolvency. I think it’s fair to say that we lost sight of the customer a little. And that is why I sometimes find the discussion about digitalization much too technology-heavy. Digitalization means above all seeing the world much more from the customer’s perspective.

And what do you think that means?

We used to organize our banks predominantly from the perspective of bank officers. Now we have to restructure our entire processes and ask the question: What do you want as a customer? And digitalization as a process is helping us refocus more clearly.

How important is the targeted evaluation of customer data?

Data is for me a central issue, but also a challenge which will mean a lot more work for us. As a bank we are hoarding one of the biggest treasures troves of data imaginable, which we can use meaningfully, also in the interest of our customers. But of course in our business, trust is of key importance, and therefore we have to handle information about our customers very carefully indeed.

How are the requirements of bank staff changing?

I think there are three kinds of activities in the bank. Standard activities will be handled electronically in future. Artificial intelligence will play a much bigger role in the advice we give to customers in future, but customers also want personal service. People will always want help from people. Perhaps even via video chat in a branch, that kind of service is likely to grow considerably.

How many less employees will Postbank have in 10 years?

It’s difficult to give figures. The trend towards fewer bank employees will continue. However, digitalization processes are not linear, and that means there will be areas where we need to grow and others where we have to cut back.

How is the cooperation with Frank Bsirske, the head of the Verdi trade union, with regard to this restructuring process?

In Germany the organization of such processes always involves both employers and employees, and there are natural areas of tension. On the other hand, I respect the pragmatic and cooperative partnership we have.

You have now made the customer your focal point. At the same time you are doing away with free current accounts. Isn’t that a contradiction?

We have to reconcile the interests of our stockholders and customers and find a fair balance, being faced with chronically low interest rates. The bottom line is that we cannot operate at a loss. When we introduced free current accounts nearly 20 years ago, market conditions were completely different. Interest rates with a zero before the comma were quite unthinkable.

Was the introduction of free current accounts similar for you with the mistake of publications putting free newspaper articles on the Internet?

That could be. It’s not something that would be done today. Two weeks ago we introduced our new model for five-and-a-half million current account users. We are currently engaged in very intense discussions with customers who are asking why we have introduced charges. But there is also a certain amount of understanding for the changes amongst the clientele. Many customers of other banks are coming to us and saying, “You only take €3.90 ($4.37) for a current account. What cash services do you offer?” We have opened more new accounts in the last two weeks since introducing our new model than in the months before.

Higher charges but no penalty interest for private customers. Is that the result of interest misery?

Yes it is. I think negative interest rates would have consequences which none of us want, and that is why I can’t really imagine it. In the case of very high amounts, especially from institutional clients, it is a slightly different scenario. A judgment has to be made based on the client relationship. But one thing is for sure: In the current market environment you should never say never.

 

Sven Afhüppe is Editor in Chief of Handelsblatt. To contact the author: [email protected]