FRANKFURT (Reuters) - Deutsche Bank (DBKGn.DE) said it will press ahead with listing its prized asset management arm DWS on Monday, nearly a year after first announcing plans to do so in an effort to regain investor support following years of scandals and restructuring.
A deal would help Deutsche’s chief executive John Cryan bolster the bank’s balance sheet and quell shareholder disquiet over the pace of its turnaround after a third consecutive annual loss, possibly opening the way to dividend payouts.
Deutsche, which said in March 2017 that it would list a stake in DWS as part of a broader overhaul following costly lawsuits and trading scandals, is expected to sell 25 percent of existing shares for 1.5 billion to 2 billion euros ($1.9 billion to $2.5 billion), sources close to the matter said last week.
Germany’s biggest bank did not specify a date, but it said it would be coordinating the initial public offering. The IPO would likely take place in the week of March 19, the sources said, adding it had been brought forward hoping to lock in stock market valuations ahead of any correction.
After numerous rights issues Deutsche hopes to put investor criticism over its balance sheet to rest by raising money through DWS, which at the upper end of the indicated range would likely qualify for inclusion in Germany’s midcap index .MDAXI.
DWS was Deutsche’s most profitable unit last year, with 725 million in pretax profit on 2.5 billion euros in revenues, compared to 877 million profit on revenues of 14.2 billion in corporate and investment banking.
Dutch bank NIBC and wholesaler B&S Group, ChemChina’s Norwegian silicon maker Elkem unit and French firm Vente-Unique all announced IPO plans on Monday in a sign the European market is heating up.
In Germany, Siemens (SIEGn.DE) last week detailed the IPO of its medical imaging and diagnostics business, but DWS said this had not influenced its timing.
“Healthcare is a very different sector. Other IPOs are either a lot smaller or will be listed elsewhere. (DWS) is the first IPO of a global asset manager in years, DWS head Nicolas Moreau told Reuters.
To ensure Deutsche can keep control of DWS even if its shareholding falls below the 75 percent usually needed to dominate German stock corporations, the unit has assumed the legal structure of a partnership limited by shares, or KGaA.
A possible merger of DWS could prompt a such drop.
“We are looking at growth opportunities to strengthen our presence in some product areas or regions,” Moreau said.
“On the alternative side, we see opportunities for growth in real estate debt, private equity and alternative credit.”
The IPO is expected to help DWS attract and retain talent with bonus shares, although overall pay will not go up, he said.
DWS is targeting net inflows of 3-5 percent of assets under management annually in the medium term, a management fee margin of at least 0.3 percent, an adjusted cost income ratio of less than 65 percent, and a dividend pay-out ratio of 65-75 percent of net profit, Deutsche said.
It is looking for ways to bolster areas such as structured credit and real estate asset management and wants to improve its distribution network and expand in countries such as Japan, South Korea, Taiwan and Singapore.
DWS had 3,800 staff managing 700 billion euros worldwide at the end of 2017.
Deutsche Bank is global coordinator on the IPO, while Barclays, Citi, Credit Suisse, BNP Paribas, ING, Morgan Stanley, UBS and UniCredit are bookrunners. Commerzbank, Daiwa, Banca IMI, Nordea and Santander are co-lead managers.
Reporting by Arno Schuetze; editing by Christoph Steitz/Jason Neely/Alexander Smith