Deutsche Bank to cut investing arm and split off Postbank

Deutsche Bank said on Friday it would cut back its investment bank and split off its Postbank retail business, as it revealed the outlines of a strategy overhaul.

Like other global banks, Deutsche has been hit by regulation and sluggish markets since the financial crisis, and the bank's management has been looking for ways to improve returns.

In a brief statement late on Friday evening, Germany's biggest bank said that as well as splitting off Postbank and cutting its investment banking arm, it would invest in its transaction banking, asset and wealth management, and remaining own-brand retail businesses.

On top of this, Deutsche - which on Thursday paid a $2.5bn fine to US and UK authorities to settle allegations that it manipulated the Libor benchmark rate - said it would overhaul its governance and controls, as well as investing more in digital banking and "rationalis[ing] its geographic footprint".

The plan - which was unanimously backed by Deutsche's supervisory board after a lengthy meeting on Friday - represents the German lender's biggest changes since co-chief-executives Anshu Jain and Jurgen Fitschen took charge at the bank in 2012.

Deutsche's management has spent the past few months narrowing down the options for a new strategy, and had been considering two models, according to people familiar with the situation.

Alongside the plan to sell Postbank and shrink the investment bank for which Deutsche ultimately plumped, its board also considered a more radical approach that would have involved a complete exit from retail banking.

However, the radical model - under which Deutsche would have fully merged Postbank with its own-brand retail business before listing the combined entity - carried big execution risks. There were also questions about the ability of a standalone investment bank, deprived of the retail bank's deposits, to meet regulators' funding requirements.

The path chosen by Deutsche was quickly backed by the trade union, Verdi, whose chairman, Frank Bsirske, sits on Deutsche's supervisory board.

Verdi said other options would have involved "big challenges", and would have enjoyed less social acceptance, adding that by separating from Deutsche, Postbank would be freed from "the restrictions of a particularly regulated, globally active, bank".

"With the share sale, new growth prospects will be opened up for Postbank," the union said.

Deutsche said that it would provide full details of the strategy on Monday.

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