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Factbox: Deutsche Bank looks to slash retail banking

FRANKFURT (Reuters) - Deutsche Bank <DBKGn.DE> will sell Postbank <DPBGn.DE> but keep its own-branded retail division under one of two strategic overhaul models currently favored by management, sources familiar with internal discussions said.

The bank's executives will present options to its supervisory board on Friday, April 24. The two models most likely to be considered are the following, according to investors, analysts and financial sources briefed on the discussions:

"THE GREAT DIVIDE"

This model would see Deutsche Bank broken in two, with all retail activities sold off, and Deutsche abandoning its so-called universal model.

The group's Postbank <DPBGn.DE> division and its Deutsche Bank-branded retail network would be sold, possibly together in a stock market listing, allowing the group to focus on more profitable corporate activities.

Postbank boasts 1,100 branches and 14 million clients, and the Deutsche Bank-branded bank 730 branches and 8.5 million clients. The group has another 870 branches and 5 million clients abroad in Spain, Italy, India and elsewhere.

The challenge would be to find a buyer. Postbank is one of the least efficient retail banks in Germany with a cost-income ratio of 81 percent compared with 67 percent at Commerzbank <CBKG.DE> .

The retail division is valued at around 4 billion euros or at a multiple of 0.4 times its book value within the Deutsche Bank group, according to calculations made by investment bank Jefferies, which would make it one of the lowest-valued retail operations in Europe.

If Deutsche were able to find a buyer willing to pay a premium of as much as 0.8 times book, its leverage ratio would improve to 4.0 percent from 3.4 percent currently and its main regulatory capital measure -- core equity tier 1 ratio (CET1) -- would rise to 13.8 percent from 11.2 percent, Jefferies wrote.

The remaining group would focus on serving Germany's dynamic corporate sector with investment banking, corporate lending, asset and wealth management, and transaction banking. It would also do battle on the international capital markets with similarly structured banks such as Goldman Sachs <GS.N>.

This corporate and investment bank would face deep cost cuts and disposals as it seeks to improve efficiency and reduce its capital and funding requirements. The investment bank would need to reduce its asset base by some 100 billion euros even if all retail activities were sold, analysts project.

The transaction bank, which provides treasury and payments services to companies, and the wealth management unit, which serves investors and rich people, would both be built up under this plan to help balance out volatile revenue streams stemming from investment banking.

"POSTBANK SALE"

Under this model, currently most favored by management, Deutsche would sell Postbank but keep its own-brand retail chain in Germany. The group would maintain its "universal" strategy selling everything from mortgages to derivatives and keep its high street presence at home.

Postbank grew out of the German postal system and received a full banking license as an independent company in 1995 before being taken over by Deutsche Bank in steps starting in 2008 for around 6 billion euros.

A sale of Postbank would lift the group's leverage ratio to 3.7 percent, as it accounts for roughly one-tenth of the bank's 1.45 trillion euros in leverage exposure, Jefferies wrote. It would also strengthen the group's CET1 ratio to 12.4 percent.

Deutsche Bank would then need to cut around 3 billion euros more from its 2014 cost base, analysts at JP Morgan estimate, of which 300 million euros would come from the remaining retail rump. The bank has already cut 3.3 billion euros in costs since 2012, less than the 4.5 billion it originally sought.

(Reporting by Thomas Atkins; Editing by Keith Weir)