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The Value of Industrial Shareholdings in a Universal Bank: The Case of Deutsche Bank in the 1990s

52 Pages Posted: 25 Aug 2011 Last revised: 30 Oct 2012

Stephan H. Späthe

Center for Financial Studies (CFS); Goethe University Frankfurt - Department of Finance

Date Written: September 1, 2011

Abstract

This clinical paper analyzes which fraction of Deutsche Bank’s market value of equity during the decade of 1990 to 1999 can be attributed to its portfolio of industrial shareholdings. The residuum then serves as a proxy for the valuation of its universal banking business. A new method for this kind of segmentation is presented and applied. Although Deutsche Bank traded during Brazil’s currency and debt crisis in January 1999 close to the asset value of its portfolio of industrial shareholdings, I show that the hypothesis that Deutsche Bank was first and foremost a closed-end fund and that the banking business was only of secondary importance is not true for the 1990s. Due to the fact that, for the first time, this study uses internal data on the book value of Deutsche Bank’s industrial shareholdings, the tax effect which is a possible explanation for the closed-end fund puzzle can be quantified. On an after tax base, Deutsche Bank derives on average a maximum of one third of its market value of equity from its large and manifold portfolio of industrial shareholding and hence at least two thirds can be attributed to its universal banking business.

Keywords: Deutsche Bank, Industrial Shareholdings, Industriebeteiligungen, Closed-end Fund

JEL Classification: G21, G32, N84

Suggested Citation

Späthe, Stephan H., The Value of Industrial Shareholdings in a Universal Bank: The Case of Deutsche Bank in the 1990s (September 1, 2011). 24th Australasian Finance and Banking Conference 2011 Paper; Midwest Finance Association 2012 Annual Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1916685 or http://dx.doi.org/10.2139/ssrn.1916685

Stephan H. Späthe (Contact Author)

Center for Financial Studies (CFS)

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Goethe University Frankfurt - Department of Finance ( email )

House of Finance
Grueneburgplatz 1
Frankfurt am Main, Hessen 60323
Germany

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