Hints of Alex. Brown sale grow

For 2nd time recently, Deutsche Bank execs indicate possibility

November 02, 2001|By Bill Atkinson and Andrea K. Walker | Bill Atkinson and Andrea K. Walker,SUN STAFF

For the second time in three months, top executives at the German parent of Deutsche Banc Alex. Brown Inc. indicated yesterday that the Baltimore-based brokerage could be on the selling block.

Clemens Boersig, chief financial officer at Deutsche Bank AG, told analysts in a conference call that the giant banking company is considering shedding assets.

During the question-and-answer session, Boersig was asked about what units - in addition to Alex. Brown - might be for sale.

"You mentioned ... the disposal of noncore, nonperforming business units is under way. And I just wonder, apart from Alex. Brown, where else you were thinking?" an analyst asked Boersig.

Boersig responded, "As far as the disposal of nonperforming assets is concerned ... there are a few projects well beyond the drawing board; however, at this point in time I cannot name them."

He added, without denying that Alex. Brown is for sale, that he is "highly confident that another disposal will be announced very shortly, and we are working on at least two other interesting projects. But you understand that I cannot be more specific at this point in time."

Boersig made the comments as Deutsche Bank announced that it will cut 4,500 more employees through 2003. Those would bring the total to 7,100, or 7 percent of its work force, since last summer. Most of the employees who will lose their jobs are in Germany and work in asset management and retail banking.

Baltimore is unlikely to see job losses, said Rohini Pragasam, a spokeswoman for Deutsche Bank North America in New York.

The news of the cuts came a day after Deutsche Bank said its net profit slid nearly 50 percent in the first nine months of the year. The company also said its Private Clients and Asset Management group would have made money had it not been for losses at Alex. Brown, which caters to wealthy clients.

"Without Alex. Brown, the private bank would without doubt have had profit in the third quarter," Boersig said.

Operating by chief's remarks

Despite the comments, David M. DiPietro, head of North American equities at Deutsche Banc Alex. Brown, said the company is operating based on remarks made in August by Deutsche Bank's chief executive, Rolf-E. Breuer.

Breuer said then that the company is strongly committed to Alex. Brown and that the unit is not for sale.

"We are actively working on improving the profitability of the business," DiPietro said. "All of that is going very well. There is no strategic change around the direction of that business."

Deutsche Bank, like other large banking and brokerage companies, has been struggling with a slumping economy and a weak stock market. Many of its large U.S. competitors, including Morgan Stanley Dean Witter & Co., J.P. Morgan Chase & Co. and Merrill Lynch & Co. Inc., have fired employees and have posted lackluster profits.

Alex. Brown has suffered, too, as nervous investors have cut back on trading.

Talk of an Alex. Brown sale began in early August after Deutsche Bank reported that second-quarter earnings had plunged 50 percent.

Performance criticism

In a news conference in Germany on Aug. 1, Breuer criticized the performance of several of the company's businesses - including the Alex. Brown brokerage operation, after positing a loss for the first half of the year - the first time in a decade that it hadn't been profitable.

"Job cuts couldn't solve Alex. Brown's problems," Breuer said at the time. "It's also an option for us to sell the unit, like with any unit that isn't generating earnings, even if blood will be streaming through such a move."

Two days later, Alex. Brown executives said they were working to revive their ailing brokerage business and position the unit for growth. And Breuer retracted his statement two weeks later and pledged support for the unit.

Boersig's comments yesterday rekindled fears that Alex. Brown could be sold.

"Most people are just kind of dumbstruck," said an employee who requested anonymity. "We don't know what they are doing. We are kind of sitting here with our mouths open. Who knows, next Tuesday we may be the crown jewel again."

Remarks aren't `news'

Thomas Schweizer Jr., head of Deutsche Banc Alex. Brown's brokerage operations, said Boersig's remarks were "not news."

"He [Breuer] wanted to sell it at the beginning of the summer but didn't. I am not sure if there is something to it or not," Schweizer said.

Alex. Brown, whose roots in Baltimore date to 1800, was acquired by Bankers Trust Corp. in September 1997 for about $2.5 billion. Deutsche Bank then bought Bankers Trust, including Alex. Brown, in June 1999 for more than $10 billion.

Once a `real jewel'

Breuer referred to Alex. Brown in 2000 as a "real jewel," and he said in an interview with The Sun that he doubted that "without Alex. Brown we would have done" the Bankers Trust deal.

Analysts say that Deutsche Bank officials have been unclear about what they will do with Alex Brown but that they have several options, including selling it or folding it into another division.

"They have not made it clear which one they would support," said Norrie Morrison, an analyst with Arnhold & S. Bleichroeder in New York. "All they've said publicly is that, yes, it's making a loss, and, no, it's not sustainable."

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