Deutsche Bank is in talks to take a minority stake in Sal. Oppenheim that could eventually lead to a take over of the embattled private bank and herald further consolidation in Europe's wealth management industry.
Sal. Oppenheim confirmed on Wednesday it was in talks for a strategic partnership with Deutsche Bank and that Germany's flagship lender will be allowed to conduct due diligence, but declined to give details on the proposed transaction.
A financial source familiar with the talks said, as a first step, Deutsche was considering buying a stake below 50 percent.
However, the talks could pave the way for Deutsche to take a majority stake in Sal. Oppenheim, banker to Germany's wealthiest families, at a later stage, other sources familiar with the deal told Reuters.
The link-up with Sal. Oppenheim would substantially strengthen Deutsche's position in Germany, Oppenheim's main market, and selectively abroad, said an analyst who did not want to be quoted.
The first source said the two banks were not planning a merger now.
Deutsche Bank shares were up 0.5 percent at 46.6 euros by 1015 GMT, underperfoming a 1.9 percent rise in the DJ Stoxx European Banking index .SX7P.
The strategic partnership is intended to give Sal. Oppenheim's customers access to Deutsche Bank's global network and strengthen Deutsche Bank's position in business with affluent private clients in Germany, Deutsche Bank said in a statement.
Deutsche Bank and Luxembourg-based Sal. Oppenheim declined further comment and further details on the size and structure of the proposed move were not immediately available.
Sal. Oppenheim had 132 billion euros ($190 billion) in assets under management at the end of 2008. The bank did not provide a breakdown of institutional and private assets.
Analysts say valuations in the wealth management sector were usually 2-4 percent of client assets, depending on the quality of the assets.
With roots going back to 1789, Sal. Oppenheim, which has around 4,000 employees, is active in both investment banking and wealth management but got caught up in the financial crisis.
The bank recorded a 2008 net loss of 117 million euros, the first loss since the Second World War.
The financial crisis and increased tax and regulatory pressures are expected to foster consolidation in the private banking segment, analysts say.
The Deutsche talks come after Sal. Oppenheim had denied for weeks that it may need extra capital to stay afloat.
Securing an investor may help Sal. Oppenheim avoid an exodus of client money similar to the one seen at loss-making Swiss bank UBS AG..
For Deutsche, it provides an opportunity to bulk up its wealth management business by taking advantage of Sal. Oppenheim's brand name and its vast German clientele.
Sal. Oppenheim made a number of high-profile investments that buckled in the financial crisis, such as subprime casualty IKB and department store group Arcandor, which became Germany's largest post-war insolvency.
The bank's owners had already put in 200 million euros in fresh capital and had signaled they could step in should the bank be required to set aside more capital.
Its personally liable partners include members of the German aristocracy such as Baron Christopher von Oppenheim and Count Matthias von Krockow.
Rating agency Fitch in July cut Sal. Oppenheim's credit rating to A- from A, citing the ongoing financial crisis after the bank slipped into the red last year. Downgrades typically make it more expensive to borrow.
(Additional reporting by Patricia Uhlig and Jonathan Gould; editing by Simon Jessop)