Hudson Executive Capital LP, an activist hedge fund led by former JPMorgan Chase & Co. finance chief Douglas Braunstein, has taken a 3.1 per cent stake in Deutsche Bank AG the Wall Street Journal reported first on Thursday.
The roughly $620million investment is Hudson's biggest so far and makes the New York-based investment firm one of Deutche Bank's five biggest shareholders. Chinese conglomerate HNA holds a 7.6 per cent stake, two Qatari funds own 6.1 per cent between them and BlackRock holds a 5 per cent stake.
Calling Germany's largest lender "misunderstood and undervalued," Braunstein -who has over 30 years of industry experience- believes the Frankfurt-based bank is taking the right steps under new CEO Christian Sewing to revive its traditional banking businesses serving retail customers in Germany, and European companies looking for deal advice, lending, and cash management.
In a written statement, the hedge fund said that there was "significant long-term value in Deutsche Bank," and that the bank was "well-capitalised and highly liquid."
“My investment is based on my belief that Deutsche Bank now has the right guy in the right job at the right time,” Braunstein told Bloomberg. “Christian has a background and a reputation, and a very good one, as saying something and doing what he says and hitting what he says.”
Sewing, a retail banking veteran, became CEO at Deutsche Bank in April, replacing John Cryan.
“We welcome Hudson Executive’s investment in Deutsche Bank. Doug Braunstein and Hudson Executive come with deep backgrounds investing in financial services companies. We appreciate Hudson Executive’s confidence in our ability to execute on our strategic objectives” Sewing said in a statement.
Deutsche Bank, a component of the DAX stock market index, is one of the worst performing lenders in Europe, having lost about 44 percent of its market value this year. Last month, its shares hit record lows after disappointing quarterly results.
The bank posted a 65 pecent drop in net profit in the third quarter of 2018. Net profit was 229 million euros vs 649 million euros in the third quarter of 2017. Profit before tax was 506 million euros vs 933 million euros a year ago. The bank's investment arm reported a 13 percent drop in revenues
while in commercial banking, revenues fell 3 percent to 2.5 billion euros. Despite the steep third quarter drop the bank said it was on track to swing to a profit this year, its first since 2014.
"We have our costs under control and sufficient capital to grow. We are on track to be profitable in 2018, for the first time since 2014," Sewing said.
Germany's flagship lender is also trying to bounce back from a run of negative headlines earlier this year, including management reshuffle, a downgrade by Standard & Poor's and failing the US Federal Reserve's stress test. It has also faced billion-dollar fines, higher competition, decreased market share in both commercial and investment banking
Deutsche Bank gained about 3 percent in midday trading at the Frankfurt Stock Exchange today on news about the fund's investment.