Deutsche Bank (DB) To Shift Operations To Frankfurt Soon
Zacks Investment Research | Jul 06, 2017 08:34AM ET
Deutsche Bank AG (DE:DBKGn) (NYSE:DB) is set to move a major part of its business currently executed in London to its headquarters in Frankfurt due to Brexit. The news was first reported by Bloomberg.
The strategy is being finalized by the bank and is expected to take effect over the next 18 months. Deutsche Bank will review the strategies if the current Brexit scenario changes.
As a Brexit fallout, Britain will lose the “passporting rights” that enable international banks to open branches and conduct business easily in any part of the European territory after being registered once. As a result, Deutsche Bank chose Frankfurt as the new booking hub and turn the London branch into a subsidiary that would require more capital.
The process is expected to be gradual with its workforce shifting the accounts, processes, booking structures and legal entities to Frankfurt.
Further, Brexit will also affect the count of people currently employed in Britain. Per the bank, about 4000 jobs are likely to be affected.
The transition to a Frankfurt booking hub will require investments in infrastructure, technology and office space, per the report.
Standard Chartered (LON:STAN) PLC (OTC:SCBFF) and Nomura Holdings, Inc. (NYSE:NMR) are a couple of other companies that have chosen Frankfurt as their next financial hub in the European Union. Goldman Sachs Group, Inc. (NYSE:GS) and Morgan Stanley (NYSE:MS) are still to reach a decision about it.
Deutsche Bank has been successful in reducing expenses in the last few quarters due to its cost-saving initiatives. However, involvement in several litigations and restructuring efforts might weigh on those initiatives. Moreover, the low interest rate environment and intense competition should continue to impact its performance
Shares of Deutsche Bank have gained 47.8% over the last six months, outperforming the Zacks categorized Banks – Foreign industry’s rally of 38.7%.
Currently, the bank carries a Zacks Rank #5 (Strong Sell).
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