Bankers Trust is more than just an acquisition. I think it forces us more than ever to reinvent the bank, and that is a crucial turning point, because there will be people who say "if that is what you have decided to do we have to part ways". After Bankers Trust, Deutsche Bank cannot and will not be the same.
Can you demonstrate you're producing shareholder value?
The first six months have been reassuring. I think our shareholders can see that investment banking is not just throwing money out of the window or after people. Of course we have a dramatic increase in bonuses accrued. If we have a bad third quarter there are no bonuses any more, but the accrued bonuses are very high. They are overcompensated by a fantastic increase in trading income.
Are there any of your major shareholders saying this is not the way to go?
No. We made a lot of experiences during our road show for our rights issue. The criticism was: market capitalization was not satisfying, and that was because of lack of profitability, on one side because of cost control, not rigid enough and on the other side the suspicion that we were not focused enough and were cross-subsidizing not-so-profitable businesses with the more profitable ones. That is an old suspicion that Anglo-Saxons especially have about universal banks. My answer to that is: we restructured the bank into divisions and the private banking division, for instance, is competing with the best private banks and is not subsidized by somebody else, and the asset manager is competing with the best asset managers in the world and is not cross-subsidized. If they aren't doing well enough - and once in a while we put every business on the block - if they are not good enough they have to be restructured.
Deutsche Bank's move into investment banking has hardly been a straight line.
That was the reason we bought Morgan Grenfell [in 1989], to learn.
But you sat on it for five years.
Because we wanted to learn. After five years we said we have an idea now, let's integrate. That was too late. The Morgan Grenfellers had experienced the best of two worlds: absolute independence and a parent with deep pockets. And suddenly being confronted with the need to integrate was not what thy expected. We would not have been in a position to integrate Morgan Grenfell as we do Bankers Trust. Ten years ago we had no idea how to manage it.
Maybe you bought Morgan Grenfell just at the end of its useful life and maybe with Bankers Trust the same is true: you always buy behind the curve.
Otherwise insitutions aren't on the market. There must be a reason why you can buy them.
Analysts say you haven't bought a US investment bank.
Bankers Trust was the perfect match. It is nicely balanced between investment banking products and products which give you recurring revenue streams on a more-or-less non-volatile basis. We made a very clear-cut calculation before we bought it and the revenue streams from the non-market-related business played a major role in making up for the business plans for the next three to five years.
Would you spin off parts of your businesses as UBS is doing?
We do the same exercise, put businesses on the block. If there's no potential any more then of course we will divest.
But lending?
We have come from two-thirds lending, one-third trading plus commission income in the good old times. Now the revenue-stream is threefold: one third lending, one third commissions, one third trading. In the first six months trading was much bigger but that was thanks to wonderful markets. The philosophy is not to get out of lending totally. I cannot imagine Deutsche Bank as a non-lending bank. But reducing lending is very difficult to implement because many of our lending officers have been educated over the years that volume growth is fine and is wanted. Bankers Trust is much further advanced in this: they don't want lending for lending's sake they need it as a strategic tool, an entrance to the customer relationship.
You're expecting customers to pay more for financial services?
We want to be the partner of choice for swaps, for fx, for all global markets products for equity products and of course the IPO: not that we are the lenders and someone else gets the IPO mandate.
Who are your closest European competitors?
UBS, ABN Amro, Credit Suisse. UBS and Credit Suisse made a very radical decision to do away with certain businesses, and to put such an emphasis on private banking. I think you can do that if you are a Swiss bank and have done private banking so successfullly worldwide for decades. That is not a solution a German bank could follow. ABN Amro starts from another position because their home country is so small, they always had to be international.
Is Deutsche Bank the wrong name?
No. I think we'll never forget our roots. That is part of the brand, nobody would expect that. Should we change our name to "global so-and-so"? I don't believe in global organizations. Citigroup is very multinational, really global, but everybody knows it's American. That's good, because that's part of their success isn't it. And we're German.
Some people feel Deutsche Bank lacks people at the top who have done the deals.
Yes but, big institution as we are, we cannot just have business done by nine people. Below that is the level which is really in charge of business-getting: Yves de Balmann, Mayo Shattuck, the people on the transaction banking side, Mary Cirillo, they are the business-getters and they do a very good job. So I think that you should take the Konzervorstand and the level below, what we call the global heads, the BereichsvorstŠnde, the Edson Mitchells the Michael Philipps and so, together as one team, and the nine on top are more for structuring and strategizing. I think then you come closer to what the Goldmans [used to] call their partners.