FRANKFURT (Reuters) - Postbank (>> Deutsche Postbank AG) is a low-profit retail banking network in need of restructuring but current owner Deutsche Bank (>> Deutsche Bank AG) may discover plenty of potential buyers prepared to look beyond the blemishes of the German chain.

"Several banks in Europe are already working on the topic very intensively," one investment banker said. Selling Postbank on the stock market instead of directly to a strategic buyer would be less lucrative for Deutsche Bank, he said.

Postbank could fetch 3.6 billion euros (£2.41 billion) if priced at a multiple of 0.8 times a book value of 4.5 billion euros, according to analyst calculations.

Both foreign and domestic players could use the chain to expand in Europe's largest economy, even if the low-profit Postbank might be described as in need of some renovation.

Postbank operates 1,100 branches and has 14 million clients and foreigners would have two main reasons to do a deal.

Firstly, Postbank offers a seat aboard the region's economic locomotive. German banks are also notoriously inefficient and a Postbank stake gives entrants a chance to buy in on the cheap.

"Whoever buys Postbank is taking home a restructuring case -- and a big one to boot," said one German mergers and acquisitions adviser, who declined to be named.

Deutsche is preparing to sell the unit at a one-off loss to increase future group profitability, reduce regulatory capital requirements, and return to a slimmer "universal" model where retail plays a lesser role.

BRAND APPEAL

The hope of buying a popular brand name at discount may be precisely what attracts some buyers.

European heavyweights like BNP Paribas (>> BNP PARIBAS) and Santander (>> Banco Santander, S.A.) both have growth strategies in Europe. The same applies for Amsterdam-based ING (>> ING GROEP), the owner of German retail banking operation ING-Diba.

While there are plenty of arguments why each may want to sidestep Postbank, the brand may prove too tempting to pass up.

ING-Diba has proved that German retail banking can be profitable, although its online-only strategy contrasts sharply with the bricks-and-mortar approach followed by competitors.

ING-Diba boasts a cost-income ratio of 47 percent, much more attractive than Postbank's unimpressive 73 percent, according to Citibank calculations.

ING said in February that takeovers were not on the agenda. Under the EU-imposed terms for state aid during the financial crisis, ING may not make acquisitions until it has disposed of a controlling stake in its former insurance arm NN Group.

But as ING's stake in NN Group slides, so may opposition to buying German street corner branches like ING already operates in Belgium, the Netherlands and Luxembourg.

FOREIGN HEAVYWEIGHTS

Europe's biggest bank by market valuation, Spain's Santander (>> Banco Santander, S.A.) is another contender. Although Santander has shown no obvious interest, the group has a solid track record abroad and is positioned to become the region's first pan-European bank.

"There's a school of thought that recognises growing evidence that the EU is allowing industry consolidation on a 'United States of Europe' basis which could then allow big European retail banks to merge," said Neil Dwane, chief investment officer for European equity at Allianz Global Investors.

"So it's possible that they could create a shareholder structure which could allow DB Retail to merge with another big country player in time," he added.

Santander now makes five percent of its earnings in Germany with a strong consumer credit business. In retail, it has 329 branches, of which 173 were acquired in 2010 when it bought Sweden's SEB.

The third foreign heavyweight is France's BNP Paribas, which sees Germany as a key market but has focused on corporate banking rather than retail.

BNP Paribas executives have said regulators would frown on big banks getting bigger even though banking union favours consolidation. But with a strong German platform, BNP may find Postbank compelling.

A domestic buyer for Postbank is deemed less likely.

Commerzbank (>> Commerzbank AG) is completing a painful integration of Dresdner Bank, purchased in 2009.

While a Postbank purchase would give Commerzbank market leader status, Commerzbank is expanding rapidly under its own steam and may have trouble asking shareholders for new cash to purchase yet another bank in need of an expensive overhaul.

Under any owner, Postbank will need to cut costs, which could prove a thorny task given the dominance of trade unions and the protected status of many employees.

(Additional reporting by Arno Schuetze, Jesus Gonzalez, Toby Sterling, Leigh Thomas, and Sinead Cruise; Editing by Keith Weir)

By Thomas Atkins