Deutsche Bank's (DBKGn.DE) retail operations will bear the brunt of its planned restructuring and will most likely be spun off in a stock market listing, two sources familiar with internal discussions at Germany's biggest bank said on Saturday.

The bank's supervisory board held a 14-hour meeting in Frankfurt on Friday, spending part of the time reviewing three scenarios proposed by the management board, the sources said.

"The retail banking operations will suffer setbacks regardless of which model," said one source, who declined to be named because he is not authorized to speak to the media.

The supervisory board favors one proposal that would see the bank's retail operations, including its Postbank (DPBGn.DE) subsidiary, bundled up and spun off with a separate stock market listing, the source said.

The proposal marks a dramatic shift from Deutsche Bank's "universal" strategy that sees it sell everything from derivatives in Tokyo to mortgages in Munich.

Rising capital demands from regulators have made the universal model too unwieldy and shedding the retail operations would help the bank to trim its balance sheet and meet capital requirements more easily, the source said.

Dumping retail would transform Deutsche into an investment and merchant bank aimed at companies, capital markets and investors, similar to Goldman Sachs. It would represent a reversal by a group that took pains to broaden its earnings beyond volatile business such as investment banking.

No decisions have been taken and are not expected to be finalised until the end of April, the source said.

A spokesman for Deutsche declined to comment on the meeting, but said the bank was working intensively on the restructuring plan and would unveil the results soon. Shareholders have said they want clarity before the upcoming annual meeting on May 21.

A second possibility would see Postbank integrated into the group's Deutsche Bank-branded retail chain following a dramatic cost cutting plan, the source said.

A third plan would see only Postbank sold, the source added.

RETAIL OVERBOARD

Under the most-favored plan, ongoing efforts to integrate Postbank into the Deutsche Bank-branded branch network would continue to reduce costs. Those efforts would see the combined retail chain ready for the stock market by 2017.

The group's global investment banking activities would suffer some restructuring under this scenario, but its position at the center of the business has faced little challenge since the bank launched its strategic review in December.

On Tuesday, co-Chief Executive Anshu Jain underscored that message by saying Deutsche Bank was committed to providing the capital market services that Europe must have if it is to grow and create jobs.

Rivals such as Barclays (BARC.L) and Credit Suisse (CSGN.VX) have slashed investment banking activities following a wave of regulation in the wake of the financial crisis, and their share prices have benefited as a result.

New rules still being hammered out by regulators are expected to increase capital demands further still.

Discontent has risen among Deutsche's shareholders as its share price has lagged that of other major investment banks and it is falling far short of its profit targets, which were already watered down once in 2014.

Deutsche still faces high costs, low profitability, and potential fines, and its plan to become Europe's "last man standing" in investment banking has turned into an expensive wait as Europe's recovery stalls.