BayernLB Weighs Options for DKB, Asset Management Arms

(Bloomberg) -- BayernLB, one of Germany’s biggest regional lenders, is in the early stages of exploring strategic options for its retail bank Deutsche Kreditbank AG that could include a sale, according to people familiar with the matter.

The Munich-based bank has held preliminary talks with potential advisers as it explores options for DKB, the people said, asking not to be identified because the process is private. DKB could be valued at about 3 billion euros ($3.4 billion) in any sale, they said.

BayernLB is also weighing options for its investment management arms, which include BayernInvest, according to the people. Deliberations are ongoing and BayernLB may decide to keep all or parts of the businesses, they said. A representative for BayernLB declined to comment.

One of Germany’s Landesbanks, BayernLB is about 75% owned by the southern state of Bavaria. The country’s banking sector, one of the least profitable in Europe, is seen as ripe for consolidation owing to its mix of quasi state-owned, cooperative and private banks. 

While efforts to merge some Landesbanks into one, powerful lender have stalled, there are signs that deals on a smaller scale are accelerating. Landesbank Baden-Wuerttemberg, or LBBW, said in December that it’s in final talks to buy real estate lender Berlin Hyp AG from the country’s savings banks. It also reached a deal to bundle some businesses with Landesbank Hessen-Thueringen Girozentrale.

Private equity firms, including Cerberus Capital Management LP and Apollo Global Management Inc., have become important players in the market, having built stakes in the likes of Hamburg Commercial Bank AG and Oldenburgische Landesbank AG.

Last year, BayernLB took steps to carve DKB out into a stand-alone business by terminating a profit transfer agreement and moving it into a deposit protection program for Germany’s private banks, making a potential sale to an outside investor more feasible.

Based in Berlin, DKB offers free current accounts and debit cards, mostly online, to about 5 million retail clients. It also lends to companies and the public sector using a network of branches. The business has been BayernLB’s main earnings driver for years and posted pre-tax profit of about 270 million euros in the first six months of 2021 -- more than half the group’s total for the period.

BayernInvest is BayernLB’s main money manager with more than 100 billion euros under management. Banks across Europe have been looking to offload their investment business due to margin pressures. In 2021, Dutch insurer NN Group NV sold its asset management unit to Goldman Sachs Group Inc., and Amundi SA bought exchange-traded funds powerhouse Lyxor from Societe Generale SA.

BayernLB also owns real estate investor Real I.S.

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