As part of a tactical overhaul, Deutsche Bank AG (USA) (NYSE:DB) will be reducing Postbank’s book value to 2.8 billion or $3.15 billion Euros. Currently, it has a book value of 4.5 billion Euros as the company believes that it could not achieve it either by a sale or through an IPO. That meant, it will write down the difference of the book value of Postbank, which is a retail unit.
Write Down Makes Sense
Deutsche Bank indicated that it would not mind making any write-downs on Postbank if it comes to closing a deal for sale. In other words, the bank is still undecided as to when this may happen since it is highly dependent upon market conditions. An investment banker, who is specialized in financial institutions, indicated that most of the retail banks were trading only at 0.5 – 0.6 times of book value only. Therefore, the write-down of this magnitude makes sense.
The German-based Bank made a decision to sell Postbank that has assets worth 152 billion Euros at the end of the last year. The objective was to meet the capital targets set by the regulators and bring down its leverage ratio that stands at 3.5% currently. That is below the standard maintained by its rivals. Postbank was acquired in 2008 and has about 14 million customers currently. It paid 6 billion Euros over several years. Since it never met the expectations, Deutsche Bank decided to divest it.
Deadline Set
Last month, the German bank indicated that divestment might take a longer time than expected. However, it has set a 2018 for its divestments. Reacting to reports, Commerzbank and UniCredit clarified that they were not in the market to buy Postbank. The bank has been trying to sell to Asian buyers and received a number of expressions of interest.
Deutsche Bank refused to discuss the bidders and potential buyers but is getting ready for divestiture before the end of the current year. For that purpose, the bank even cancelled a deal enabling it to control the tactics, as well as, tap into its cash flows. The company clarified that a deal could be reached when the market conditions turn favorable.
