EUROPE - Josef Ackermann, chief executive of Deutsche Bank, has signalled that Deutsche Asset Management in the UK is “under review” and could be sold if the bank fails to restructure the embattled business by the end of the current quarter.
The signal came during Deutsche’s 2004 results press conference in Frankfurt. The bank reported that its entire asset management unit suffered another E20bn in total investor outflows in the fourth quarter, most of which had to do with DeAM in the UK.
The UK business was already behind most of the E13bn in institutional money that DeAM lost as whole during the third quarter.
Ackermann told the news conference: "The outflows on the institutional side, particularly in England, have not been helpful in terms of our profitability. The UK business is therefore under review."
Asked whether the review entailed a possible sale of the business, Ackermann said: "We are keeping all options open. For right now, though, we are trying to fix the business which is a sign of our commitment to it."
As part of the fix, Deutsche said it would cut 2,700 primarily back-office jobs in its investment banking and asset management units. It did not break down the figure between the units.
As a whole, Deutsche is cutting 6,400 jobs in the group to meet a goal of raising its return on equity to 25% by the end of 2005 - from 17% in 2004.
Speaking after the news conference, Kevin Parker, Deutsche's new head of asset management, said he was confident that DeAM in the UK could be fixed.
"We're already seeing signs of improvement. For example, one of the business's balanced funds finished sixth out of 48 funds last year. This is a sign to institutional investors that DeAM's performance is getting better."
Parker told IPE that in the past, DeAM in the UK suffered both from "not offering institutional investors the right kinds of products and from performance that was naturally related to the three-year equity market".
Parker also declined to say how many jobs in Deutsche's asset management unit would go, but stressed that the point of the restructuring was to boost efficiency.
"The best example I can give you are the large number of websites that the unit has operated in the past. We need to streamline that," he said.
Amid the outflows during the fourth quarter, operating profit for asset management sagged to E99m from E207m in the third quarter. For the full year, operating profit totalled E490m, down E158 from the previous year.
Turning to the outlook for the business, Ackermann said its fortunes would be shored up by an anticipated E20bn in inflows during the first quarter. He said most of the assets would come from DeAM's taking charge of assets from the German arm of the insurer Zurich.
He added that DWS, Deutsche's retail fund arm, was also a pillar of strength. In 2004, DWS recorded net inflows of E932m, helping to boost its market share in Germany to 25%.
Deutsche's asset management unit has E536bn in assets under management worldwide, E132bn of which is invested in the bank's mutual funds.