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Deutsche Bank Might Speed Up Postbank Integration Process

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After failed merger attempts with Commerzbank and UBS Group’s UBS asset management unit, Deutsche Bank DB is now focusing on speeding up the Postbank integration process. The news was reported by Financial Times.

Per the article, Deutsche Bank plans to achieve this by finishing staff reduction at its head offices within two years instead of three as decided earlier. Thus, the overall strategy is not likely to be altered, but the execution time period will be.

With this move, the German lender aims to boost the bottom line as Frank Strauss, head of retail and commercial bank, told Financial Times that annual cost synergies from Postbank integration are expected to exceed restructuring costs from 2019.

Brief Background on Postbank Integration

In second-quarter 2018, Postbank AG and the Deutsche Bank private and commercial client business were merged to form DB Privat-und Firmenkundenbank AG. The merged unit serves more than 20 million private clients, around 50% of whom use the bank’s online offering. It also serves 1 million commercial and corporate clients. 

Also, through this merger, the company targets cost and revenue synergies of €900 million annually by 2022.

Further, it estimated the total cost of the planned restructuring measures to integrate Postbank will be €1.9 billion, resulting from restructuring and severance costs as well as IT and other costs.

Further Planned Actions

Deutsche Bank plans to continue laying off employees steadily over the years as “sudden, large-scale lay-offs” were hard to do, per the article. Also, after shuttering more than 400 branches, the company seeks to restructure head offices, operations and IT, after discussing details with the unions by mid-2019.

The company’s retail operation will remain spread across two headquarters in Frankfurt and Bonn, but each individual function will be centralized at a single location. For example, mortgage finance will be based in Frankfurt while consumer finance will be conducted from Bonn.

Our Take

Though Deutsche Bank’s restructuring efforts like cost-saving measures look encouraging, it is really difficult to determine how much the bank will gain, considering the lingering headwinds. Moreover, dismal revenue performance remains another concern.

In six months’ time, the stock has lost 21.7% on the NYSE compared with 2.5% decline recorded by the industry.

Deutsche Bank currently carries a Zacks Rank #4 (Sell).

A couple of better-ranked stocks in the same space are Banco Latinoamericano de Comercio Exterior, S.A. BLX and United Overseas Bank Ltd. UOVEY. Both these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Banco Latinoamericano has been revised 3.4% upward for the current year, in the past 60 days. The company’s share price has gained 13.8% in the past six months.

United Overseas’ earnings estimates for 2019 have been revised 1.2% upward, in the past 60 days. Its share price has risen 2.9% in the past six months.

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Banco Latinoamericano de Comercio Exterior, S.A. (BLX) : Free Stock Analysis Report
Deutsche Bank Aktiengesellschaft (DB) : Free Stock Analysis Report
UBS Group AG (UBS) : Free Stock Analysis Report
United Overseas Bank Ltd. (UOVEY) : Free Stock Analysis Report
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