A fun game in Asian wealth management lately has been to pick the next European bank to sell its private bank to a Singaporean or Swiss contemporary. Lately, if you had Société Générale, ABN Amro, Barclays or (a non-European left-field choice) ANZ, you were a winner.
If you went for Deutsche Bank, though, it appears you will be going home empty-handed. Asia CEO Werner Steinmueller tells Euromoney Deutsche is “absolutely committed to it. It’s a growth business.”
There were four reasons word had begun to circulate that Deutsche might consider a sale.
First, most obviously, Deutsche has had well-publicized issues with capital owing to more than $10.5 billion of regulatory fines in less than two years, and this would have been an easy way to raise a lot of money, although this has been superseded by CEO John Cryan’s decision to change course and raise a further $8 billion of capital at group level.
Secondly, it looks just a little light at $45 billion under management in the region; you need about $62 billion to crack the top 10. Thirdly, there have been major senior departures, chiefly the business’s head, Ravi Raju, and key team members to UBS; and fourth, there are obvious buyers in OCBC and DBS, plus perhaps the Swiss groups.
Steinmueller says, though, the hope is to grow it, not sell it, adding: “Our aim is to have extraordinary growth, to move from about top 10 to top five.”
Top five means getting ahead of DBS, which had $117.69 billion under management on December 31: a big ask.
However, like Credit Suisse, it believes that focusing on this client segment can generate a lot of opportunities in other areas of the business.
“Here we can use our technologies for markets and products for Asia family businesses,” says Steinmueller. “Take the real-estate tycoons here in Hong Kong: we are dealing with them on both sides, on the wealth management and the markets side, conducting complex real-estate financing as well as taking care of the private money.
“This is a strong linkage where all that we offer comes together.”
[In Asia-Pacific] clients and counterparties were a bit quicker to leave us, but they have also come back a bit quicker post the DoJ settlement- David Lynne, Deutsche
Steinmueller, who became the first Vorstand board member to serve in Asia when he took the top job in the region in August, was formerly global head of transaction banking, and sees that as key to the bank’s recovery in the region as it tries to move away from group-level liquidity and regulatory concerns.
He calls transaction banking “one of the sweet spots in Deutsche Bank. When you have transaction banking, you have daily contact with a client. You talk about their strategy.”
Steinmueller sees it as an opportunity to supply other products to the same client.
Deutsche has suffered in the region in most league tables and surveys during the past 12 months: Dealogic numbers show it ranking 13th in advisory in Asia-Pacific in 2016 and just 25th in debt capital markets (DCM), albeit in a year when Chinese houses dominated the tables; it ranked fourth in equity capital markets.
It declined in Asia cash management, foreign exchange and private banking in Euromoney’s most recent surveys, though is top in the region for trade finance.
David Lynne, co-head of global markets Asia-Pacific, says of DCM: “We’ve skewed that business over the last couple of years to more of a fee focus from a league-table focus” and broadly Deutsche bankers argue that they make their money in areas that league tables don’t reflect, most obviously the global markets business.
Steinmueller says: “Markets is still the biggest engine. Roughly half of our revenue [in the region] comes from the markets business. Profitability is largely in line with that as well.”
Both men accept that the bank suffered from reputational issues at home.
Lynne says: “We clearly had some challenges last year. Deutsche Bank was in the press every day, and we had issues around counterparties and clients’ credit concerns.”
However, he adds: “[In Asia-Pacific] clients and counterparties were a bit quicker to leave us, but they have also come back a bit quicker post the DoJ settlement.
“That’s still a work in progress that will occur throughout this year, across prime brokerage balances in equity, listed clearing balances and everything else, but there has definitely been a strong upswing of people coming back to us in the last two months.”
Steinmueller says wealth management was affected, but again claims the worst has passed.
“Nobody asks about our standing, our credibility, our liquidity position now,” he says. “We are back in the game.”
Steinmueller confirms that, after a year of (mainly) zero bonuses, a normal bonus round will now commence.
Despite many senior departures, from Asia CEO Gunit Chadha to high-yield bond origination head Guillaume du Cheyron and China M&A head Pei Shen Chou, the bank has been able to attract staff from competitors, including Lynne’s global markets co-head James Boyle from Citi, head of ECM syndicate Simon Galvin from Goldman Sachs and head of Asia debt syndicate Ed Tsui from JPMorgan.
“If you sat through the last two years,” says Lynne, “I wouldn’t leave now.”
An in-depth feature on Deutsche Bank in Asia will be published in the March issue of Asiamoney, available online at the end of March.