Deutsche Bank Takes Steps To Cultivate U.S. Investors

LONDON - Giant Deutsche Bank is pursuing plans to expand its stockholder base in the United States.

"We're very interested in listing in New York," said Clas Roehl, manager in Deutsche Bank's investor relations department.

To that end, the Frankfurt-based global bank secured shareholder approval to issue shares worth $42 million, mainly to initiate trading on the New York Stock Exchange, Mr. Roehl said.

In view of the bank's $15.3 billion market capitalization, the step would be symbolic. But in view of the size of the U.S. market and demand for stock in strong institutions overseas, observers expect more shares to follow.

Disclosure Is Main Hurdle

No target date has been set, and a formal request for a listing has not been submitted.

According to Mr. Roehl, the principal hurdle is the same as for other companies based outside the United States: satisfying disclosure requirements for public issues set by the Securities and Exchange Commission, which is far more demanding than counterparts elsewhere.

Deutsche Bank is no stranger to investors in the United States, where about one million American depositary receipts are traded over the counter, though without the bank's official support. A formal listing would supplant these unsponsored ADRs.

Stock Widely Held Abroad

As a case study in how to drum up business outside its home country, Deutsche Bank would offer some useful pointers. No less than 40% of its market capitalization is held by investors in other countries, mainly the United States, Britain, and Switzerland.

Thus, bank officials say proudly that Deutsche Bank shares are traded more actively in foreign stock markets than the stock of any other major companies in industrialized nations.

One reason why Deutsche Bank enjoys such a wide following lies in its vast cross-holdings with other German companies, analysts said. The market value of these holdings, including a 28% stake in Daimler-Benz, the car and truck maker, is estimated at $10.8 billion.

Because of these extensive cross investments, Deutsche Bank is akin to an investment trust, a proxy for taking a broad holding in the German stock market, said analyst Christopher Davis, of the London brokerage firm Barclays de Zoete Wedd.

However, that has tended to put a damper on the bank's share price performance in recent months. The broad Frankfurt stock market index has fallen from about 12% in the past 12 months to a level of 683.3 currently, a retreat linked with German economic and monetary problems following the unification with eastern Germany.

In the last 12 months, Deutsche Bank stock in turn has underperformed the market by 5%.

Expansion Under Way

Fundamentals at the bank are mostly positive, however. UBS-Phillips and Drew analyst Thomas Albrecht says that Deutche's big investment in building a branch network in eastern Germany is certainly not a negative for the stock.

"They're already making money there and the bank has very conservatively provided for future loan losses," he said. Deutsche Bank announced a provisional operating profit of $1.1 billion for the first four months of 1991, up 20%.

Salomon Brothers Inc. has consequently put out a buy recommendation on the stock, citing among other things continued solid growth in operating profits, maintenance of high credit quality despite eastern expansion and the longer-term profit prospects in the east.

Since the beginning of the year, however, the normally strong German currency has fallen 22%, from 1.49 marks to the dollar to a current 1.82 because of the burgeoning German money supply and higher inflation stemming from the cost of unification. This exchange-rate loss erodes the value of a holding in Deutsche Bank stock.

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