Deutsche Bank AG (DB - Free Report) is reportedly contemplating to sell its banking business in Poland as the German banking giant is streamlining its operations, in efforts to boost its capital position. The news was first reported by Reuters, citing sources familiar with the matter.
The potential sale of Deutsche Bank Polska, the country’s 11th largest lender in terms of assets, also comes amid efforts by the Polish government to get hold of larger stake in the nations’ banking sector and reduce foreign ownership. This is aimed at preventing crisis and bailouts after the 2008 financial crisis. Notably, foreign investors own around 60% of the banking industry in Poland.
The report stated that Deutsche Bank might face difficulty in seeking a buyer as around a third of the unit’s assets are in foreign currency loans which are mostly denominated in Swiss franc and euro mortgages. Sale of these mortgages may be prohibited by the Polish regulator. The report quoted a senior bank source saying, "The main question is who will be ready to buy it, as if you deprive it of its Swiss franc-denominated mortgages portfolio, not much remains."
Notably, the Polish regulator has been demanding that foreign investors, that are looking to exit Poland, have to retain portfolios of foreign exchange-denominated mortgages as those portfolios pose risk to the financial stability of the country.
Deutsche Bank is not the only foreign entity mulling to exit the nation. In April this year, General Electric Company (GE - Free Report) inked a deal to sell GE Capital’s major stake in Poland-based Bank BPH’s Core Bank to state-owned lender Alior Bank.
Any likely materialization of the sale of Deutsche Bank’s Polish banking business should impact the company’s capital position positively. Revenue challenges at the company are likely to ease gradually as John Cryan, Chief Executive Officer of Deutsche Bank, is expediting Strategy 2020 efforts to revamp the bank, with focus on simplifying the bank’s business model, reducing costs and shedding unprofitable businesses. Nevertheless, the company’s imminent hurdle remains the proposed $14-billion settlement with the U.S. Department of Justice (DoJ).
Deutsche Bank currently carries a Zacks Rank #3 (Hold).
Banco de Chile (BCH - Free Report) and Bancolombia S.A. (CIB - Free Report) are a couple of stocks in the foreign bank space, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Banco de Chile and Bancolombia have long-term expected EPS (earnings per share) growth rate of 5.04% and 2.5%, respectively.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>