By Edward Taylor and John O’Donnell
FRANKFURT (Reuters) – Some of Germany’s top industrial companies have revived a decades-old network to discuss the possibility of taking a symbolic stake in Deutsche Bank, aiming to help it through its current turmoil, an executive at one of the firms told Reuters.
If such a support plan went ahead, it would mark a reversal of roles from the years of the post-war economic miracle till the 1990s, when Deutsche <DBKGn.DE> owned chunks of German industry, coming to the rescue of some that ran into trouble.
The discussions have involved a handful of blue-chip firms, covering whether they should club together to buy a relatively small stake in Deutsche, a step which could then help the Frankfurt-based bank to persuade other investors to inject more capital, the executive at the large DAX-listed company said.
“There were talks and discussions about that topic,” the executive said. However, no decision has yet been made on whether to push forward with the plan.
Handelsblatt reported the capital injection that has been discussed is in the low single-digit billions of euros. Deutsche Bank declined to comment on the report.
If implemented, the plan would mean a comeback of “Deutschland AG”, which despite its name was never a company but rather an opaque corporate network dominated by top German executives which shielded vulnerable companies from volatile market forces, bankruptcy or an unwelcome takeover.
Following the days when Deutschland AG was active, Deutsche Bank strayed from its roots in supporting industry, pursuing a strategy of extremely risky market bets before the global financial crisis of 2008-09.
Shares in Deutsche – which despite the might of the German manufacturing economy is the country’s only global heavyweight lender – hit a record low last week on fears about its ability to shoulder a U.S regulatory penalty that could cost it up to $14 billion.
The shares have rebounded partly on signs that efforts are afoot to shore up confidence in Deutsche. For instance, Qatari investors who own the largest stake are planning to hold onto their shares and are keeping open the possibility of buying more if the bank decides to raise capital, sources familiar with Qatari investment policy told Reuters.
Nevertheless, the stock remains 46 percent below where it was at the end of last year and German public opinion is hostile towards a bank that ran into trouble on Wall Street.
THE RIGHT GOALS
The fact that some of Germany’s top companies are considering stepping in underscores the depth of Deutsche’s crisis, given the high political risk of even contemplating state aid before national elections in 2017.
Siemens <SIEGn.DE> chief executive Joe Kaeser repeated his support on Friday for Deutsche, which is making big job cuts to lower its costs and selling some businesses. “Management is pursuing the right goals and has our full support. Deutsche Bank for us is a long-standing and reliable partner,” he said.
Earlier this month Kaeser joined other business leaders to defend the bank in a front-page article in a German newspaper. The others were Juergen Hambrecht, the chairman of chemicals giant BASF <BASFn.DE>, Dieter Zetsche, chief executive of carmaker Daimler <DAIGn.DE> and Johannes Teyssen, head of energy firm E.ON <EONGn.DE>.
“German industry needs a Deutsche Bank to accompany us out into the world,” Hambrecht said at the time.
Economy Minister Sigmar Gabriel said on Friday that Germany had an interest in ensuring Deutsche had a successful future, but reiterated the government was not planning state aid.
It remains to be seen how many companies might be willing to spend money on a bank that is not only facing billions in fines but also whose earnings power has been sapped by tougher regulation that has restricted a business once based on taking large market bets.
Deutschland AG predates World War Two and lasted until the late 1990s when it faded away at a time of rapid economic change and internationalization. It was tasked with looking after the broader national economic interest, including by giving loans at favorable conditions if it helped Germany gain a competitive advantage in a particular industry.
In the 1990s, Deutsche Bank was at the center of this network and held a 28 percent stake in Daimler-Benz AG, a 25 percent stake in retailer Karstadt AG, 100 percent in steel firm Kloeckner & Co. AG and a 23 percent stake in sugar refinery Suedzucker AG.
Through board seats on these companies, Deutsche Bank could force changes in corporate Germany and in 1987, ousted the Daimler-Benz chief executive. It eventually sold the industrial stakes, saying they were a hindrance to effective corporate governance.
This time around, the industrial companies are in the driving seat, a sign that corporate Germany is willing to flex its muscles to reassert its primacy in times of crisis.
The expression of support came despite the fact that Deutsche Bank is widely disliked by the German public for its aggressive drive into global investment banking.
A glimpse into the level of distrust toward investment bankers was once offered by Helmut Schmidt, a German chancellor during the Cold War who died last year.
“Deutsche Bank is no longer German,” Schmidt lamented in 2011. “Today the understanding that Deutsche will look out for German interests no longer holds true,” he wrote in Die Zeit, a weekly newspaper.
In 2011 a U.S. Senate Subcommittee report said the bank, which at the time was worth around 47 billion euros (now $52 billion) – about three times its current market value – used its own funds to make investments in mortgage-related securities that had a notional value of $128 billion in 2007.
Even if German executives decide to back the bank, they face a tough task in selling the idea to their shareholders.
Speaking on Friday at the market debut of RWE’s Innogy unit, CEO Peter Terium said: “We have just raised billions with the promise to invest in (power) networks and renewables. I don’t think this included a promise for a Deutsche Bank investment.”
($1 = 0.8977 euros)
(Additional reporting by Christoph Steitz, Alexander Huebner and Jens Hack; Editing by Georgina Prodhan and David Stamp)