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Deutsche (DB) to Shift Large Portion of Assets From London

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Deutsche (DB) to Shift Large Portion of Assets From London

Deutsche Bank (DB) remains on track to remodel its business in order to improve financials. However, shifting of assets from London might be a time consuming and an expensive affair.

Deutsche Bank DB is planning to transfer a large chunk of assets from its London base to Frankfurt headquarters post Brexit, per an article by Financial Times. Though no final decision on the size of asset to be moved is taken yet, Deutsche is likely to trim its balance sheet by about 75%.

The bank is facing rising pressure from the European regulators regarding the size and complexity of its U.K. operations after Brexit. Overseas lenders will be required to comply with the rule for U.K. branches, as it will become a third country when it leaves the European Union.

Citing people familiar with the matter, Financial Times reported that Deutsche might transform its U.K. base into a ringfenced subsidiary following Brexit. This might not greatly impact the number of employees in London operations. However, it would still have an impact on London, which has been witnessing many overseas banks moving operations to other areas as a Brexit woe.

Another option being examined by Deutsche is to shrink the size of the London balance sheet to a level below its U.S. holding company.

With a few months left for Britain’s exit from the European Union, many other global banks are making alternate arrangements to ensure business continuity post-Brexit. Paris, Frankfurt and Dublin seem to be the most preferred choices for the companies to make such transitions. Bank of America Corp. BAC, JPMorgan Chase & Co. JPM and HSBC Holdings HSBC are also making similar moves.

Deutsche has made a remarkable progress in restructuring initiatives so far, which keeps us encouraged. However, concerns over persistent pressure on revenues due to low interest rates in the domestic economy along with involvement in several legal issues have resulted in the company losing 26.6% on the NYSE over the past six months compared with 14% decline of the industry.

 

 

Currently, the stock has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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