Deutsche Bank AG announced plans Tuesday to increase its stake in National Discount Brokers Group to 19.3% in a move to bolster the electronic distribution of its products and services.
As owner of 350,000 NDB shares, Frankfurt-based Deutsche Bank is already a significant institutional shareholder of the Jersey City-based broker. The banking company said it would buy an additional three million shares, for $136 million, to boost its stake to 14.6%. After the close of this deal, scheduled for next quarter, Deutsche Bank said it would increase its stake to 19.3% by purchasing shares in the open market.
This month when Deutsche Bank unveiled its planned acquisition of the rival Dresdner Bank in Germany, it also announced its intention to move away from a retail branch network and focus on reaching customers electronically. When the Dresdner deal closes, which is expected this summer, German insurer Allianz AG would take a 49% stake in the combined banks' retail network, which is to be called Bank 24.
The deal with NDB is "a major stepping stone to reach online customers without having to rely on bricks and mortar," said Michael Philipp, head of global equities at Deutsche Bank.
For NDB, which was recently named the No 1 online broker in the United States by Barron's magazine, the deal offers an opportunity to establish a presence in Europe and Asia where Deutsche Bank has a significant presence, said Dennis Marino, chairman and chief executive officer of NDB.com.
The NDB deal would also give its 208,000 customers access to Deutsche Bank's equity research in the United States, as well as access to initial public offerings the bank underwrites, Mr. Marino said.
He said that teaming up with Deutsche Bank puts his company ahead of the competition, which he said has spent a "fair amount of capital establishing a beachhead abroad."
Instead of spending money, NDB actually stands to gain capital to reinvest in its operations, while tying itself to what Mr. Marino described as one of the most recognizable names in the world. "Deutsche Bank has a presence throughout the entire world," he said.
NBD, which has about $12 billion of customer assets in this country, is not alone in seeking to expand beyond the United States. Charles Schwab & Co., E-Trade Group, and TD Waterhouse Group, which is partly owned by Toronto-Dominion Bank, have all sought to establish a presence abroad.
TD Waterhouse, which has a presence in Asia, the United Kingdom, and India, has said it is close to announcing a deal that would take it to continental Europe. Reached at his office Tuesday, chief executive officer Stephen McDonald said to "stay tuned." He declined to comment on the Deutsche Bank/NBD alliance.
But the pressure is on for U.S. brokerage companies to get a foothold in Europe, according to Jaime Punishill, an analyst at Forrester Research in Cambridge, Mass.
"Europe isn't exactly sitting back and waiting for U.S. firms to come in and bowl them over," Mr. Punishill said.
Evangelos Kavouriadis, an equity analyst at Sanford C. Bernstein & Co. in New York, agreed.
"I don't think Europe is that behind on that front," said Mr. Kavouriadis, who added that other European banking companies are pursuing similar deals. On Tuesday Dutch banking company ABN Amro announced an alliance with Trade.com, the U.S. global financial services Internet portal of BlueStone Capital Partners.
Trade.com is to be the foundation for building the banking company's online brokerage service worldwide, Amro said in a statement. ABN Amro is investing $62.5 million for 25% of BlueStone.