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Deutsche Bank AG (DBK) ended talks with Guggenheim Partners over three of four asset-management units the German bank sought to sell.
Deutsche Bank and Guggenheim, a U.S.-based investor that manages $125 billion, agreed to end discussions on a potential sale of DWS Americas, DB Advisors and Deutsche Insurance Asset Management (ADN) and focus talks on RREEF, a division that invests in real estate and infrastructure, the Frankfurt-based lender said today in a statement. Deutsche Bank will continue to evaluate the other three businesses, according to the statement.
The curtailed talks may make it harder to sell the affected divisions and mean Deutsche Bank would generate a “negligible” capital boost from selling RREEF, according to Andrew Lim, an analyst with Espirito Santo Investment Bank. Deutsche Bank has said the asset sales weren’t part of its plan to increase capital to meet regulatory requirements.
“There are quite a few asset managers up for sale,” said Lim, who recommends investors sell the stock. “There is not a lot of interest in these businesses.”
A call to Guggenheim before New York office hours wasn’t answered. Deutsche Bank had started a review of the units in November to assess how regulation and competition are affecting the businesses.
Christopher Wheeler, an analyst with Mediobanca SpA (MB), said selling RREEF alone would probably account for less than half the 2 billion euros ($2.6 billion) in proceeds he initially estimated for a sale of the units.
“The means of boosting the bank’s relatively weak capital position has been much reduced,” Wheeler said in an e-mail. “This probably will mean a capital benefit to Deutsche Bank, if the sale is completed, of around 600 million euros to 750 million euros, rather than the 1.5 billion euros they were hoping for.”
Deutsche Bank fell 2 percent to 30.60 euros at 11 a.m. in Frankfurt trading today, the second-biggest decline in Germany’s benchmark DAX index, though it was trading above its level when it made the announcement. Financial stocks fell today after JPMorgan Chase & Co. said it suffered a $2 billion trading loss.
In February, the German bank chose Guggenheim as the potential buyer for the DWS mutual funds in the Americas, the advisory units for institutional investors and insurance firms, and RREEF. Deutsche Bank has said it plans to keep its DWS mutual-fund businesses in Europe and Asia.
The units under review had a combined 423 billion euros of assets under management at the end of 2011, of which RREEF contributed 49 billion euros, according to a presentation the bank published May 8.
Deutsche Bank reiterated last month that the company can meet stricter regulatory capital requirements that take effect at the end of the year and that the bank’s “capital toolbox provides further flexibility.”
The company estimates that so-called risk-weighted assets will jump by 105 billion euros to 485 billion euros at the end of 2012 as it applies Basel III capital rules, a presentation Deutsche Bank published April 26 on its website shows.
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