By Andreas Kröner and Arno Schuetze
FRANKFURT (Reuters) - Deutsche Bank (DE:DBKGn) investors on Wednesday cheered a report the lender was considering listing its asset management unit on the stock exchange, a move that could make a cash call to shareholders less likely.
Reuters reported on Tuesday the bank was weighing a partial initial public offering (IPO) of its asset management unit as part of an overhaul following its record payout over toxic mortgages in the United States.
Shares in Germany's flagship lender soared more than 6 percent to a 12-month high of 19.50 euros, almost double their level in late September when they were weighed down by worries that Deutsche's legal bills could prove fatal.
"The idea (of an IPO of the unit) is not new but becomes more realistic now," a trader in Frankfurt said. "The rationale behind (it) is to show value of the unit to release capital."
According to analysts, the asset management unit, which includes Deutsche Bank's mainstay DWS retail asset management brand, could be valued at 8 billion euros ($8.6 billion) in a potential IPO, meaning floating 25 percent would free up 2 billion euros in capital.
"It's a smart entrepreneurial decision," a source close to the matter said, while another source said deliberations were still at an early stage.
Prior to a potential listing, the unit would seek to get its main registration moved to Luxembourg, which has clear tax and regulatory advantages, the sources said.
Deutsche Bank declined to comment.
The bank is expected to give a strategy update to investors in the spring, after publishing 2016 results on Feb. 2.
According to a consensus estimate published on Deutsche Bank's website on Wednesday, analysts expect the lender to post a net 2016 loss of 882 million euros, weighed down by its U.S. mortgages settlement.
Deutsche Bank last week finalised a $7.2 billion U.S. settlement over the mortgage securities that soured in the 2008 financial crisis.
Not all Deutsche Bank investors, however, approve of a potential partial sale of the asset management unit.
"A sale of the cash cow would be an adhoc action that would reap some money now, but down the line the bank will forgo revenues," a top Deutsche Bank investor said.
The asset management unit has been touted as a potential divestment target repeatedly. However, Deutsche Bank has always said that it would not shed the business.
Chief Executive John Cryan said last week at a gathering of policymakers and business executives in Davos that asset management remained "absolutely core".
"People forget how big it is and it's a very lovely steady stream of predictable profits and revenues for us, so we like it very much, so we’ll keep that," he said.
The asset management unit had 715 billion euros in assets under management as of September 2016, far less than competitors such as Blackrock (NYSE:BLK) or UBS.
It has seen some outflows as customers worried about the size of Deutsche's litigation bill, which had weighed on staff morale, an employee of the unit told Reuters.
"The more independence we get the better," that person said.