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Deutsche Bank’s strategic challenge

Since 2010 Deutsche Bank AG’s annual pretax profits have fallen significantly, although 2014 saw something of a recovery. This largely reflects the weaker performance of the investment bank, which has been troubled by unfavorable markets, legal charges and noncore costs.

The German retail bank businesses of Deutsche Bank have not offset this decline, raising obvious questions as it steels itself in the week of April 20 to break itself up or, at least, spin off Deutsche Postbank AG. A significant fine for involvement in LIBOR manipulation could also be revealed April 23.

Returns in the more upmarket blue-branded retail business are higher than at Postbank; this should encourage the retention and restructuring of this segment. Yet Deutsche Bank must be sure that it can reverse its decline in net income and returns. The purchase of Deutsche Postbank has clearly failed, and the business will doubtless be sold, but the price is unlikely to be rewarding.

Next Finance , April 2015

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