Deutsche Bank aims to dominate German retail banking
Deutsche Bank wants to dominate German retail banking with a huge capital increase to gain control of Postbank, it said on Monday while stressing it will easily meet new global banking rules.
"We are now about to advance to the champions league of European retail banking," Deutsche Bank chairman Josef Ackermann told a press conference a day after launching a rights issue worth around 10 billion euros (12.8 billion dollars).
The results of an offer to sell one new Deutsche Bank share for every two already owned should be made public on October 6, a statement said.
The money raised would help acquire Postbank shares and make Deutsche Bank "the undisputable leader in Germany's retail banking business," Ackermann added.
The German bank also intends to pursue internal growth in China, Europe and India, he noted.
"These are the main regions where we are willing to expand further because we see a lot of potential there," he said.
Together, Deutsche Bank and Postbank would have 24 million clients in Germany, bolstering a second piller to complement the former's global investment banking unit.
Deutsche Bank already owns a stake of nearly 30 percent in Postbank, which has the largest retail network in Europe's largest retail banking market, and plans to acquire about 21 percent more with an offer of 24-25 euros per share.
The final amount of that offer will be determined by the German financial regulator SoFFin in a few days, Ackermann said.
"We will pay approximately 6.3 billion euros," he added.
Deutsche Bank also holds a mandatory exchangeable bond to be converted into an additional Postbank shareholding of 27.4 percent in 2012.
Meanwhile, Ackermann stressed that the deal would not prevent Deutsche Bank from meeting new international standards for bank capital unveiled Sunday in Basel, Switzerland.
"We have absolutely no need for further capital in order to comply with the Basel III regulations," he said in reference to rules drawn up to prevent a repeat of the recent global financial crisis.
The new regulations will force banks to augment current reserves and be phased in from 2013, according to a statement by the Swiss-based Bank for International Settlements.
"It was good to have this clarity so we can confirm our strategy, that we comply with with the regulatory requirements," Ackermann said.
In response to rumours that Deutsche Bank wanted to beat other big banks to the capital markets, he said: "We will be the first mover here that is also very important."
Once the capital increase is completed, Deutsche Bank estimated it would have a Tier 1 capital ratio of about 11.6 percent and a core Tier 1 ratio of around eight percent.
Those figures represent the percentage of a bank's capital able to absorb losses and provide a measure of the financial institution's fundamental health.
Under the Basel III rules, banks would have to hold common equity, the highest form of core capital, of 4.5 percent of all assets by January 2015, compared with 2.0 percent at present. Over the same period, banks must strengthen their so-called Tier one capital, which is now defined on a tighter basis than before.
Banks must also build up an additional 2.5 percent "buffer" by January 2019 to reduce further the need for public bail-outs of systemically critical institutions.
"We fully support" the new levels, Ackermann said.
His bank forecast its new retail banking unit would make a pre-tax profit of three billion euros in the medium-term, on annual revenues of 10 billion.
Consolidating Postbank's 1,100 branches should generate around one billion euros in cost savings.
After posting sharp losses on Friday, Deutsche Bank shares gained 1.64 percent to 48.48 euros in midday trading on Monday, while the Frankfurt DAX index of leading shares was 0.95 percent higher overall.
© 2010 AFP