Exclusive: Deutsche Bank reviews future of Italian business

Mon Oct 26, 2015 4:50pm EDT
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By Pamela Barbaglia and Kathrin Jones

LONDON/FRANKFURT (Reuters) - Deutsche Bank (DBKGn.DE: Quote) is considering scaling back its Italian retail operations by selling branches and cutting jobs as its new chief executive overhauls the company to keep pace with rivals, according to five sources familiar with the matter.

CEO John Cryan is under pressure to reform Germany's flagship bank to reduce costs and boost profitability, after costly litigation from a series of scandals and the fallout from the Asian market rout pushed its valuation well below competitors such as Credit Suisse CSGN.VX and UBS UBSG.VX.

Italy is Deutsche Bank's second-biggest European retail business after Germany, with 4,000 staff and around 300 branches. The review could lead to a large reduction of its operations and pave the way for a possible exit from the country further down the line, three of the sources said.

"No final decision has been taken on what to sell - and how to sell it - in Italy. But Deutsche Bank's presence in the country is no longer seen as strategic," said one source.

Deutsche Bank declined to comment.

The bank announced a record pretax loss of 6 billion euros ($6.8 billion) in the third quarter and warned of a possible dividend cut. Cryan, who became CEO in July with a promise to reduce costs, is due to reveal details of its new strategy on Thursday.

Last year Deutsche Bank took steps to shrink its Italian network and sold 90 branches as part of a sale-and-leaseback deal with a property investor. But a further reduction of its operations would represent a significant step in a country where it has been present since the 1920s and which it has said is profitable "despite a difficult market environment".

It would not be alone in retreating, however. Other international banks including Barclays (BARC.L: Quote) and GE Capital have put their Italian units on the block as they shift their focus away from certain European markets.   Continued...

The Deutsche Bank headquarters are seen in Frankfurt, Germany October 8, 2015. REUTERS/Ralph Orlowski