Awards for Excellence 2002
Deutsche Bank
Deutsche Bank dominates the European credit market. But it is for the progress that it has made in credit markets outside Europe over the past 12 months, as much as for its all-round strength in Europe, that the bank wins the credit bond house award this year.
In North America, Deutsche has used its powerful structured credit and credit derivatives business to lead its drive into the US credit market generally and begin challenging the bulge-bracket firms on their home turf.
Although there is still some way to go, it has made impressive progress in asset-backed securities in particular – having hired a team from CSFB – and is gradually making its way up the league table for vanilla debt new issuance in the US market.
Over the past 18 months, Deutsche has led a domestic US or global US dollar transaction for 12 out of the top 15 most active, highest-volume corporate issuers in the US. In 2001, it won first-time bookrunning assignments in US dollars for 25 North American issuers, compared with just seven in 2000.
By its own calculations – combining a mix of business areas comprising structured credit, primary ABS, primary and secondary corporate debt, and secondary ABS – Deutsche has risen over the past year from twelfth position to fifth in the US.
“For the first couple of years, structured credit drove our business in the US but now we are coming on very strongly on the vanilla credit side,” says Anshu Jain, head of global markets at Deutsche Bank. “Over the next 12 months I would like to see us in the top three credit houses in the US and I am pretty confident that we can get there.”
The strategy in Japan has been the same. Use the structured credit business, and other high-margin areas such as distressed debt, to establish a profitable base and expand into vanilla products.
That tactic seems to be paying off. According to Jain, Deutsche ranks third behind Nomura and Nikko Salomon Smith Barney in the domestic Japanese credit market.
In non-Japan Asia, the tack has been different. There, Deutsche has targeted the local currency debt markets – on both the structured and vanilla sides.
“The international debt issuance market from Asia only consists of a limited amount of sovereign issuance,” says Jain. “The real action has been, and will continue to be, in local-currency debt.”
But it is in Europe, where the global credit market has shown the most dramatic growth over the past two years, that Deutsche has drawn clear. Its role in the development of the European credit market has been immense – whether in lead managing bonds for corporate and other credit issuers or in structured areas such as credit derivatives and collateralized debt obligations (CDOs).
Deutsche has been involved in structuring and marketing several CDOs for leading fund managers such as Axa and Pimco in Europe in recent months. In the credit derivatives business more broadly, Deutsche and JPMorgan Chase are way ahead of the competition.
Deutsche heads the tables for debt issuance in euros by a margin, while it has progressed two places up the league table of lead managers of dollar straights – from tenth last year to eighth this.
How long the dominance of the universal banks in the credit business will last is open to question. Many people believe that as soon as credit stops being a scarce commodity again the investment banks will come back strongly as competitors.
But Jain is confident that his bank has a model that works. “You can’t just rely on clout in this business,” he says. “You need to ally expertise with balance-sheet strength. But we think that the dominance of the firms that achieve that alliance is a long-term phenomenon.”
Nick Evans
