Deutsche Bank Sells Abbey Life Unit to Phoenix for $1.2 Billion
Deutsche Bank Sells Abbey Life Unit to Phoenix for $1.2 Billion : Deutsche Bank on Wednesday said it had sold its Abbey Life insurance unit to Phoenix Group Holdings for £935 million ($1.22 billion) in a deal that will boost the German lender’s capital position.
Shares in the bank rose about 3% in early trading in Frankfurt, following sharp declines earlier this week amid intensifying concerns about its financial health.
Deutsche Bank Chief Executive John Cryan said in a statement that the sale would allow the bank’s asset-management arm to focus on its core business and strengthen its capital position.
The sale, while relatively small, is good news for the bank at a time of renewed investor concerns about its thin capital cushion ahead of a potential multibillion-dollar settlement with U.S. authorities over mortgage-securities probes. The looming charge has sparked concerns that the bank may need to raise fresh funds, and questions about whether Berlin might be forced to support the lender.
Deutsche Bank has dismissed such concerns in recent days, and Mr. Cryan ruled out the need for a capital increase or government assistance in a local media interview published Wednesday.
Germany’s finance ministry also denied Wednesday a media report saying the government and regulators are preparing a rescue plan for the bank.
Deutsche Bank said the Abbey Life sale will add about 0.1 percentage point to its common equity tier 1 capital ratio. However, the transaction—which is subject to regulatory approval—will result in an expected pretax loss of about €800 million ($897.2 million) because of goodwill impairment.
For Phoenix, the deal will add £10 billion of assets under management, 735,000 new policyholders and boost cash flow to support planned dividend increases. The U.K.-listed business will partly fund the deal through a £735 million rights issue.
As part of the transaction, Deutsche has agreed to indemnify Phoenix to cover a potential negative outcome from a U.K. investigation into Abbey Life’s fair treatment of customers and annuity sales practices.
—Monica Houston-Waesch contributed to this article.
Source : http://www.wsj.com/articles/deutsche-bank-sells-abbey-life-unit-to-phoenix-for-1-2-billion-1475054496
