WestLB yesterday gave a strong signal it would sell its principal finance business, the department headed by Robin Saunders, which has been recently mired in controversy after German banking regulators announced they were investigating some of its deals.
Jürgen Sengera, chief executive of WestLB, said he was getting the portfolio valued before deciding whether to hive it off. If WestLB does decide to sell, Ms Saunders is likely to be interested. She tried to buy out her unit last year but was rebuffed by the German bank's management. Ms Saunders is understood to have received indications from personal contacts and institutions that they would help back a bid, which would probably be worth north of £1bn for the equity content alone. The debt in the portfolio would also have to be accounted for.
There has been mounting speculation that WestLB, one of Germany's banks ultimately underwritten by the country's regional governments, would rid itself of its principal finance unit, which has carried out a string of complex financing arrangements for the likes of Wembley Stadium and Formula One. "A sale would be only one alternative among several. The management board will give a mandate to two investment banks to determine the value of the portfolio," Mr Sengera told a German business magazine.
Such a move makes Ms Saunders' future with WestLB look even less certain. Her reputation has been under a cloud since regulators announced a few weeks ago they were looking at her department, focusing on a £850m loan WestLB made to the struggling TV rentals business Boxclever.
The regulator is believed to be concerned that the bank offloaded far less of the liabilities to Boxclever than was thought. WestLB indicated last month that it had increased provisions for bad debts to ¤1.9bn (£1.3bn), much of that money thought to have been put aside for losses at Boxclever.
Ms Saunders' reputation took a further blow yesterday when WestLB confirmed it had pulled its backing for a £961m bid for AWG, the water company the star financier was seeking to buy. Her pleas to her seniors in Düsseldorf earlier this week were turned down as the bank seeks to reduce its risk profile after recording a record loss this year of ¤1.7bn (£1.1bn).
When asked about Ms Saunders' future, Mr Sengera said: "We're not going to make a conclusive judgement before all the investigations are completed." Ms Saunders is understood to have been furious that WestLB did not back her up more convincingly when the inquiry by the German regulators emerged.
Ms Saunders would probably not find it difficult to fund a buy-out, counting among her friends Bernie Ecclestone, chief executive of Formula One, and Philip Green, the retailing billionaire whose purchase of Bhs she helped finance.
There is still the possibility that WestLB will keep Ms Saunders' business, which produced half of WestLB's profits for the past four years. However, Mr Sengera is facing calls from German politicians to return WestLB to its domestic roots and many of the bank's senior figures are thought to favour abandoning principal finance.Reuse content