Analysts View a U.S. Deal By Deutsche Bank Unlikely

FRANKFURT -- Deutsche Bank AG will continue to look east in the near and medium term despite persistent rumors that it may take advantage of a weak U.S. banking sector to increase its foothold there, analysts said.

Rumors that Deutsche, with share capital of more than $9.44 billion, might bid for a U.S. partner have swirled around markets for months. They are based on the idea that the low prices for U.S. bank shares may give Germany's largest bank a window of opportunity.

But analysts say Deutsche has enough to do in eastern Germany and eastern Europe without looking closely into U.S. investments.

Expansion at Home

"East Germany was a chance for the bank to expand its home market by a quarter," said Deutsche spokesman Hellmut Hartmann.

Analysts said Deutsche's east German operations, conducted through a joint venture with Deutsche Kreditbank AG, the commercial wing of the former East German central bank, meant the bank had enough on its plate.

"There is no doubt that Deutsche wants to expand in the United States, but I do not think the United States is at the top of their priorities at the moment", said Stephen Lewis of Salomon Brothers in London.

Another analyst doubted that Deutsche would be interested in linking up with a risk-burdened U.S. bank.

Deutsche Bank is active in the United States through several investment units, including the New York based Deutsche Bank Capital Corp.

Efforts to move into commercial banking would force the bank into a clash with U.S. authorities, analysts said.

"An acquisition in the U.S. would clash with the Glass-Steagall Act and that is a major obstacle," said Thomas Albrecht of UBS-Phillips & Drew in London.

The 1933 act prohibits U.S. commercial banks from underwriting or dealing in most securities. Plans for its reform are under discussion but no decisions have been made.

A Different Structure

In contrast, most German banks are universal banks, conducting both commercial and investment banking.

"We are evaluating the U.S. situation and observing what happens with the banking reform act there," said Mr. Hartmann. "In the meantime, we are trying to do as good a business as we can."

Analysts noted that Deutsche was also looking at other eastern European countries.

The bank hopes to increase business in France, where it has long been under-represented, the analysts say.

While Germany's other two big banks, Dresdner Bank AG and Commerzbank AG, plan to cooperate with major French banks, Deutsche has not found a French partner.

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