Awards for Excellence 2005
Deutsche Bank
The leader in bond underwriting league tables has improved its offering for financial institutions
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| Hope Pascucci |
“To be successful in this business you do have to constantly reinvent yourself,” claims Hope Pascucci, global head of debt capital markets and syndicate at Deutsche Bank. Pascucci makes a convincing case that Deutsche has been the driving force or had a key involvement in many of the major innovations and themes of the past year in the global debt markets.
Investors’ willingness to go down the capital structure and yield curve was part of a wider global trend of accepting greater complexity in order to achieve yield. Deutsche was part of that and, on the other side of the equation, where bank borrowers were keen to take historically cheap funding by offering tier 1 subordinated long-dated bonds or structured notes, cash-rich corporates were tidying up balance sheets while sovereigns continued to seek new and traditional ways to bolster their fiscal positions.
“In the past we have been criticized for having a stunning sovereign, supra and corporates business but our FIG business was not on the same level. We have used structural innovation to really expand our FIG business,” says Pascucci.
The growth of CMS-coupon-linked tier 1 for banks is as clear an illustration as any of the new paradigm, with investors attracted by high initial coupons and issuers excited by low all-in funding levels.
“We have really taken that business by the horns over the last six months and have shown considerable success in all varieties of capital issuance,” says Miles Millard, European head of debt capital markets at Deutsche. “We have been absolutely at the forefront of the innovation, and very effective at using our retail distribution for both structured and vanilla capital issuance in the FIG space.”
Deutsche is at the top of the international bond underwriting table, with an 8% market share. In the euro sphere, it is the biggest house in corporates, investment-grade euros, high-yield and emerging market debt. The US is the one area where Deutsche could be said to lack the profile it enjoys domestically. But not only did it maintain its dominant position in western and eastern Europe debt markets but also managed to make further headway with its US franchise – especially in asset-backed securities, high-yield and leveraged loans, and made substantial gains in Asia and Latin America.
Although the US agencies are less important than before, Deutsche has a substantial share of their business. But it is interesting to note that elsewhere the bank is picking its fights carefully, a strategy that appears to be paying off. For example it is a key underwriter for US insurance, energy, commodity companies and REITs. In all international dollar bond markets and the US corporate market it has won market share, with a number three and number seven position.
“Industrial America has not been particularly active, traditionally that is a harder place for us to break through. They’ve not been active and that works in our favour,” says Pascucci. Elsewhere, Deutsche can lay claim to being a leading counterparty in US high yield, ABS and CDOs. Its business is broader than any of its competitors’.
“We printed deals for 334 different borrowers last year. That compares with the number two player which is 67 behind that number,” boasts Pascucci.
Deutsche is also the only underwriter on every public 30-year sovereign bond in euros for the 2004/05 period and in fact is the number one bookrunner for sovereigns, agencies and supranationals.
Elsewhere for sovereigns, it has enjoyed some of the most notable transactions, including the first 50-year deal for France. Perhaps of greater note was the first ever public monetization of Paris Club debt. Called Aries this was a A5billion repackaging of Russian debt due to Germany and completely shook up the emerging-market world.
A 20-year deal for Pemex was the longest euro issue from an emerging market borrower, and the bank also led the first subordinated issue from a Russian issuer, Vneshtorgbank.
The increased emerging-market focus on euro issuance played well to Deutsche’s strengths, giving it almost a quarter of the total euro volumes – comprehensive market supremacy by any standard.
In terms of dollar emerging-market sovereigns, long-dated bonds for Brazil, the Philippines, El Salvador and Peru prove Deutsche is not purely a euro house. Also it has brought more than its fair share of corporate and financials to market.
