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Deutsche Bank in Hot Pursuit of World's Wealthy

By John Grgurich – Updated Apr 7, 2017 at 12:52PM

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Duetsche Bank can't seem to make up its mind.

Deutsche Bank (NYSE: DB) can't seem to make up its mind.

Germany's flagship bank recently announced its intention to focus more on private banking and wealth management, yet it just finalized a deal that will sell BHF Bank: a subsidiary that specializes in private banking and wealth management. It's unlike Germans to be indecisive. Was gibt?

It's all about the euros
BHF was acquired in 2009 as part of the larger acquisition of Sal Oppenheim, a big private bank. Deutsche has been trying to offload BHF for a while now, but past efforts were scotched by Germany's financial-markets regulator, BaFin.

If approved by regulators, the deal is worth $498 million for Deutsche. And there's the rub: It's all about the Benjamins, or in this case, the euros. By selling BHF, Deutsche can inject some much-needed capital into its balance sheet, helping it meet the new Basel III reserve requirements, all while removing the profit-and-loss roller coaster that can come with owning a subsidiary.

Everybody's doing it
Private banking and wealth management is all the rage right now. Morgan Stanley's (NYSE: MS) recent deal with Citigroup (NYSE: C), to buy out the remainder of Morgan Stanley Smith Barney, was precisely intended to boost Morgan Stanley's strength in that area. (Citi's lone intent in the MSSB deal was to get leaner and more focused, a trend among the superbanks, but it didn't comment on its own wealth management ambitions or how the loss of their portion of MSSB could affect them.)

Goldman Sachs (NYSE: GS) has also gotten into the private-banking game, opening what it calls a bank-within-a-bank to serve it's wealthiest clients. Deutsche didn't come right out and say so, but the implication of the BHF sale, done alongside its stated intention to move more into exactly the sort of banking BHF does, is that Deutsche will develop a home-grown private banking and wealth-management business.

As post-financial crash regulation builds in countries all over the world, banks are looking for revenue streams and banking models that are safer and less likely to blow up in their faces than, say, derivatives trading, or other similar feats of investment-banking derring-do.

Cleaning up and strengthening balance sheets while internally building out private banking and wealth management services is a good start. But Deutsche had better hurry: It's not the only bank out there in mad pursuit of the world's wealthy. To learn more about the most-talked-about bank out there, check out our in-depth company report on Bank of America. The report details Bank of America’s prospects, including three reasons to buy and three reasons to sell. Just click here to get access.

Keep up with all the latest news on Deutsche Bank and the other banks mentioned here by adding them to your free Motley Fool watchlist:

Fool contributor John Grgurich has a German Shepherd, who is never indecisive, but owns no shares of any of the companies mentioned in this column. Follow John's dispatches from the bleeding edge of capitalism on Twitter @TMFGrgurich.

The Motley Fool owns shares of Citigroup and Bank of America. Motley Fool newsletter services have recommended buying shares of Goldman Sachs Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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Stocks Mentioned

Deutsche Bank Stock Quote
Deutsche Bank
DB
$7.67 (-2.04%) $0.16
Citigroup Inc. Stock Quote
Citigroup Inc.
C
$42.98 (-1.97%) $0.86
The Goldman Sachs Group, Inc. Stock Quote
The Goldman Sachs Group, Inc.
GS
$304.17 (-1.56%) $-4.83
Morgan Stanley Stock Quote
Morgan Stanley
MS
$81.25 (-2.24%) $-1.86

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