On Wednesday, Deutsche Bank AG (DB) and Craigs Investment Partners Limited of New Zealand announced the completion of their strategic alliance. As per the terms of the alliance, Deutsche Bank would hold a 49.9% equity interest in Craigs, while the remaining 50.1% will be held by the existing shareholders of Craigs Investment.
When the agreement was first announced in March 2010, it was accepted that Deutsche Bank’s global institutional equities platform and Craigs Investment’s New Zealand institutional equities operations will work together to cater to clients in New Zealand and beyond.
Further, an employee of Craigs Investment will be placed on Deutsche Bank’s Sydney institutional equities sales desk to drive cross-border flows. Institutional clients of both organizations will be able to contact Deutsche Bank’s global research and Craigs Investment’s institutional equities research team in New Zealand.
Additionally, six existing directors of Craigs Investment will continue on the Board Incorporatedluding Neil Craig who will continue as executive chairman, joined by six representatives from Deutsche Bank Australia and New Zealand Limited.
Craigs Investment is one of New Zealand’s largest investment advisory firms, which offers personalized solutions to both private investors and corporate clients. Craigs’ services include investment advice and management, securities trading, research, cash management, institutional dealing and investment banking.
The alliance will provide clients with an extensive range of financial products and services, global research and substantial investment opportunities. Deutsche Bank’s advisory and global capital markets businesses coupled with Craigs Investment’s recognized potential in distribution and capital markets of New Zealand will endow clients with improved services and products. Craigs Investment now has approximately 110 investment advisors and $5 billion in funds under management and administration.
Deutsche Bank has adopted several strategic initiatives in the past several quarters Incorporatedluding the repositioning of its core business, bolstering of capital levels, opportunistic acquisitions and investments in organic growth.
Last month, Deutsche Bank reported a second quarter net income of €1.2 billion ($1.5 billion) or €1.75 a share, up from €1.1 billion or €1.64 per share a year earlier. While the company experienced a substantial drop in revenues from investment banking, this was more than mitigated by lower loan loss provisions, gains realized from the acquisition of commercial banking activities from ABN AMRO in the Netherlands and a gain on its own debt.
Deutsche Bank’s results were in line with other investment banks such as Credit Suisse Group (CS), JPMorgan Chase & Co. (JPM) and Citigroup Inc. (C), all of whom have reported significant declines in trading revenues in the second quarter, reflecting hesitance on the part of investors, with the sovereign debt crisis and regulatory reform related issues looming on the horizon.
Going forward, though we expect Deutsche Bank to post a growth in earnings, we think any significant improvement will be necessarily restrained by the tardy recovery of the overall economy.
Deutsche Bank currently retains its Zacks #3 Rank, which translates to a short-term ‘Hold’ rating. Considering the fundamentals, we are maintaining a Neutral recommendation on the stock in the long term.
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