As Deutsche Bank AG works out the details of paying a multibillion-dollar U.S. government fine, and pundits worldwide consider the future of the bank, asset owners and consultants are pondering what it all means for Deutsche Asset Management.
The bank has been working out a deal with the U.S. Department of Justice, which is asking for $14 billion to settle civil claims in connection with the bank's issuance and underwriting of residential mortgage-backed securities and related securitization activities between 2005 and 2007.
In a statement on its website Sept. 15, Deutsche Bank said it “has no intent to settle these potential civil claims anywhere near the number cited.”
On Sept. 28, Germany's Federal Ministry of Finance denied it was preparing rescue plans for the bank.
DeAM spokeswoman Oksana Poltavets declined to comment.
Deutsche Bank shares have fallen more than 45% this year, through Oct. 13, and were trading just above €12 ($13.18).
Deutsche Bank CEO John Cryan has insisted that the German bank has no intention of selling the asset manager. In a letter to employees on Sept. 12, Mr. Cryan said: “There is one rumor in particular that I would like to dispel by making it unambiguously clear that Deutsche Asset Management is and will remain an essential part of our business model.”
In support of that position, the bank last month sold Abbey Life Assurance Co. Ltd. out of Deutsche Asset Management.
Mr. Cryan said the deal allows the bank to “continue to focus on its core businesses of active, passive and alternatives, while this transaction will also strengthen Deutsche Bank's capital position.”
The asset management business has been dealing with failed sales attempts, multiple reorganizations, leadership shuffles and numerous resignations over the past four years.
Data from Pensions & Investments show that Deutsche Asset Management's assets under management totaled $846.82 billion as of Dec. 31, down 33% from the year earlier.
Meanwhile, due to Deutsche Asset & Wealth Management's pending split into separate units in January, Deutsche Asset Management's U.S. institutional tax-exempt AUM was $1.8 billion as of Dec. 31, down 84.5% from the year before. (Deutsche reported its year-end AUM figures as if the split had already occurred.)
Some industry observers think that although selling off the asset management business might be unlikely, if Deutsche requires capital, it might not have a choice but to sell — at least parts of it.
“Deutsche Bank would have to consider selling DeAM if they had to raise capital. Given the depressed share price, the dynamics around a dilutive capital raise are challenging, and a sale of DeAM would present a potentially more attractive alternative to fill a capital hole,” said Domonkos L. Koltai, a partner and co-founder of investment bank PL Advisors, New York.
Mr. Koltai added: “The likelihood of that scenario depends on the size of the settlement with the DOJ. The latest rumors (of $4 billion to $5 billion) suggest that a capital raise won't be necessary.”