Finance

Cerberus trims stakes in Deutsche Bank, Commerzbank

Cerberus Capital Management is selling a chunk of its stakes in Deutsche Bank AG and Commerzbank following years of disappointing share performances at the German lenders.

The US private-equity firm is selling about 21 million shares out of around 62 million it owns at Deutsche Bank, and 25 million out of 63 million it holds at Commerzbank, according to a person familiar with the sale.

Based on the price of the shares on 10 January, the combined value of the stock to be sold is about $500m.

Cerberus bought both stakes in 2017, becoming one of the biggest backers of both banks. It owned 3% of Deutsche Bank and 5% of Commerzbank.

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The firm’s thinking was that it could make money in the profit-starved banking landscape as economic growth picked up, among other factors.

But Europe’s recovery has been anaemic, and the German financial system is in many ways stacked against banks making money. Commercial banks such as Commerzbank, the second largest after Deutsche Bank, compete against state-owned landesbanks and savings banks that offer cheap loans to consumers and businesses, with less pressure to make a profit.

Shares of Deutsche Bank and Commerzbank have been recovering as overhauls at the banks bear fruit. But they have lagged behind even the poor performance in European bank stocks since Cerberus bought into the companies.

Since Cerberus’ stake in Commerzbank was disclosed in July 2017, the German bank is down 31%, compared with the Stoxx 600 Banks index’s decline of 18%. Deustche Bank’s shares are down 21% since November 2017, compared with the Stoxx 600 Banks index’s decline of 14% over the same period.

In 2019, Deutsche Bank and Commerzbank tried to merge to boost their chances, but the move failed and each since has pursued its own strategy.

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In 2020, Cerberus had a public battle with management at Commerzbank, which it blamed for a growth plan it said wasn’t ambitious enough. Eventually the bank’s then chief executive officer and its chairman left, but Cerberus opposed the chairman who was put in place.

The move by Cerberus to sell some of its stakes in the banks follows the departure of Matt Zames as president of Cerberus last year. He oversaw the firm’s investments in the financial services sector.

With Deutsche Bank, Cerberus took on the unusual role of becoming a paid adviser to the bank. That put Zames in the position of both trying to fix Deutsche Bank, which had been suffering from years of losses, restructuring, legal fines and management turnover, and attempting to salvage Cerberus’s investment.

Cerberus’s stake in Deutsche Bank was worth less than half of what it paid by the time its advisory relationship with the bank ended in 2019, The Wall Street Journal reported.

Since 2019, Deutsche Bank’s performance has improved as the bank cut costs and its investment-banking business thrived under the pandemic.

Morgan Stanley is handling the sale of the stakes for Cerberus.

Write to Patricia Kowsmann at [email protected]

This article was published by Dow Jones Newswires

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