Yahoo Finance Deutsche Bank Follows Shake-Up Plan: To Sell Indian Unit
Deutsche Bank AG DB will divest its Indian asset management unit as part of its newly appointed co-chief executive officer (“CEO”) John Cryan’s plan to revamp the bank by reducing trading operations. The company entered into a deal with Prudential Investment Management, the global investment management subsidiary of Prudential Financial, Inc. PRU for the same.
Though the terms of the agreement were not divulged, the asset management unit of Deutsche Bank, which is the second-largest foreign owned mutual fund asset manager in India and established in 2003, will add around $3.2 billion in assets under management to Prudential. The deal is, however, still subject to regulatory approvals.
With Deutsche Bank struggling under the burden of numerous litigation issues and settlements, the company looks forward to free up capacity for growth by managing existing positions more actively and not just those in its non-core operations unit.
While the company will continue to invest in retail and business banking, asset and wealth management as well as investment banking businesses, its main intention is to control costs by simplifying the bank’s business model and narrowing the scope of operations in order to battle higher legal expenses expected in the near-term.
The deal will mark Deutsche Bank’s exit from India's highly-competitive mutual fund industry. Five global financial services companies have already exited the market in the previous three years. Morgan Stanley MS, Fidelity Worldwide and Japan's Daiwa Asset Management are among these companies with The Goldman Sachs Group, Inc. GS expected to jump on the bandwagon soon.
On the other hand, the deal will provide a boost to Prudential Investment Management, which ranks among the world’s largest investment management firms. Moreover, the acquisition will considerably expand Prudential’s expertise, distribution platform and product portfolio in India.
CEO of Prudential Investment Management said, “Deutsche Bank’s highly-respected investment and client service teams complement the strong team we already have in place to serve new and existing clients, as we continue to build our business across India.”
As the European economy is yet to stabilize, we don’t foresee any significant favorable change in Deutsche Bank's performance in the near term. However, the company’s commitment to the Strategy 2020 (unveiled in April), which includes cost saving measures and operational restructuring to bring the company’s growth back on track keep us encouraged regarding a turnaround.
Currently, Deutsche Bank carries a Zacks Rank #4 (Sell).
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