With Deutsche Bank’s strategy meeting coming up on Friday, the group is expected to announce major cuts to its investment banking unit whilst avoiding a complete exit from its retail operations.
As the group has faces mounting regulatory pressures, and the bank struggling to comply with CET 1 requirements, its top management is now facing growing pressures to cut costs. Friday’s board meeting is facing two scenarios in order to reduce costs.
In the first scenario, Deutsche could sell off Postbank whilst cutting €150bn of assets in the investment banking division.
The second scenario would involve an effective split of the group, dividing retail from investment banking units. Postbank and Deutsche’s own retail banking units would be fully merged and subsequently listed.
The reforms have been divisive among Deutsche Bank shareholders, yet, according to Financial Times sources, the board is set to decide in favour of the first option.
While a sale of Postbank could provide a boost to Deutsche’s CET1 ratio, the group might struggle to find a buyer as its retail division currently has a cost-income ratio of 81%, making it one of the least efficient retail banks in Germany.
The announcement of cuts in the investment banking segment implies that Deutsche has opted against competing explicitly with Goldman Sachs and Morgan Stanley, thereby joining other European giants such as UBS, Credit Suisse and Barclays in their retreat to retail and private banking.