FRANKFURT/LONDON (Reuters) - Deutsche Bank’s planned listing of its asset management arm is unlikely before the first half of next year and could be later, as it wants more time to refine and sell the business’s strategy to potential investors, people close to the matter said.
Germany’s largest lender announced plans to list the unit, including its main DWS retail asset management brand, in March as part of a broader restructuring aimed at reviving the bank’s fortunes following costly lawsuits and trading scandals.
While it said at the time the share sale would take place at some point over the next two years, investors expected the bank to move quickly to take advantage of buoyant equity markets and seal a deal that could raise 2 billion euros ($2.3 billion).
But its so-called “equity story” for selling the business to investors is far from ready, and Deutsche is desperate to avoid another U-turn after it put retail business Postbank up for sale, only to decide later to keep it, the sources said.
Some investors have also indicated they would prefer a stronger focus at Deutsche’s asset management arm on so-called passive investments or exchange traded funds (ETFs), whereas its main business is currently with actively managed funds.
“The IPO story is not ready yet,” one of the people said, adding that in his view the unit needed to invest in its ETF business to keep up with competitors.
A spokesperson for Deutsche (DBKGn.DE) said: “We are currently focused on creating a Deutsche AM business that is distinct from Deutsche Bank, in preparation for the planned partial IPO. We expect to complete that process later this year. We have not yet started to present our equity story to investors.”
Deutsche Bank reports second-quarter earnings on Thursday.
Chief Executive John Cryan conceded in May it would take time to realize the benefits of the lender’s latest efforts to “plant and sow” - or breathe new life into the Deutsche brand.
Deutsche Asset Management currently has 723 billion euros invested worldwide, of which 540 billion are actively managed, 103 billion in ETFs and the rest in alternatives such as real estate.
Concern around the scale of Deutsche’s ETF offering comes as market leaders BlackRock (BLK.N) and Vanguard continue to grow assets under management in Europe, with the latter flagging plans to expand its continental operations.
Underpinning that is a belief the market for ETFs in Europe will continue to grow strongly over the coming years, fuelled in part by new regulations aimed at making the costs of investing more transparent. European ETF assets rose for the fifth straight year to hit a record 514.5 billion euros in 2016, data from Thomson Reuters Lipper show, up 15 percent but still just a fraction of the 9.4 trillion euros in total invested assets.
But with asset managers under pressure from investors to cut fees, even in the already low-cost ETF market, a provider needs to have scale to succeed.
European sales of ETFs during 2016 were led by BlackRock, Vanguard and State Street, the Lipper data show, with Deutsche Bank not even making the top-10. It still retained its position as the second-biggest ETF provider in Europe, behind BlackRock’s iShares, with assets under management of 53.3 billion euros, the data show.
But by May, Deutsche's ETF brand Xtrackers had fallen to third place behind BlackRock and Societe Generale's Lyxor unit. [tmsnrt.rs/2uwBywT]
An analyst at a top-50 shareholder in Deutsche Bank was more sanguine about the company’s ETF market position, with a number six position globally leaving it “probably at minimum efficient scale”, but with “clearly scope to build” in the United States. Deutsche Bank is, however, making headway with the organizational work for listing the asset management division.
Division head Nicolas Moreau said last month the bundling of the unit’s businesses into one holding company would be done by October, as would the finalization of distribution and service contracts between Deutsch asset management and its mothership.
Investment banks vying for mandates to help organize the listing had expected Deutsche to pick a so-called global coordinator - which will work alongside Deutsche’s own investment bank on the deal - before the summer break.
That has slipped into the second half of the year, people close to the matter said, adding banks that helped Deutsche with its 8.5 billion euro capital raising earlier this year stood a good chance of securing roles on the deal.
Deutsche hopes that by giving its asset management arm more operational independence the unit will attract more talent, and Cryan has said the bank will maintain a “controlling and super-majority stake” in the business.
Additional reporting by Kathrin Jones and Alexander Hübner; Editing by Mark Potter and Susan Fenton