Exclusive: Deutsche Bank reviews future of Italian business

Tue Oct 27, 2015 3:39pm 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.

A Milan-based spokeswoman for Deutsche Bank said on Tuesday the German lender was still committed to Italy, which "remains a key market for Deutsche Bank and any rumors about an alleged withdrawal are completely unfounded."

But some of Deutsche Bank's top shareholders are critical of its presence in retail banking in the euro zone's third-biggest economy. "It's a sub-scale business," said a fund manager at a top-10 shareholder, speaking on condition of anonymity. "They don't really earn money there and costs are high.

"The Italian market is consolidating and Deutsche Bank simply does not have the power to expand their business there," the fund manager said. "Instead, they should use the opportunity to get rid of their retail branches."

The manager argued Deutsche was wasting shareholders' money by maintaining its Italian presence, also pointing to its retail networks in Spain, Portugal, Belgium and Poland as no longer needed.

"They should focus on restructuring the core bank and avoid a capital hike," he said, referring to the risk that the bank could tap shareholders for fresh funds.   Continued...

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