Debt capital markets: Deutsche regains lost ground

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By:
Peter Lee
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Bank has fought back up the DCM rankings; Merger of DCM and global transaction banking coverage partly explains how

Global DCM Bookrunner Ranking
Full year 2010
RankBookrunnerValue ($mln)% share 2010% share 2009
1Barclays Capital461,2357.67.1
2JPMorgan438,9627.38.4
3Deutsche Bank397,3056.65.6
4BAML378,4736.36.1
5UBS301,4435.03.1
6Credit Suisse299,7305.04.1
7Citi296,7414.96.4
8Goldman Sachs263,3254.44.6
9Morgan Stanley259,0404.34.1
10RBS233,2653.94.6
Subtotal3,329,51855.154.1
Total6,047,515100.0100.0
Source: Dealogic
Deutsche Bank enjoyed another strong year in debt capital markets in 2010 as it continued to recover from the setback of heavy losses in credit trading at the end of 2008. At that point it had fallen to fourth in the annual league table of global debt capital market bookrunners, having led that ranking in 2007. It was fifth in 2009.

For 2010 it is back to third, behind JPMorgan and Barclays. Perhaps more significantly, its market share was 6.6% in 2010, up from 5.6%% in 2009, and it has narrowed the gap to the second-ranked firm, JPMorgan, which had a 7.3% share for 2010, down from 8.4% in 2009.

This strong performance in global DCM is just one sign of how, behind the scenes, Deutsche has been reorganizing, as Anshu Jain, sole head of the corporate and investment bank since the retirement of banking head Michael Cohrs last summer, seeks to make the divisions now reporting to him work more closely together.

In December, the bank created a new capital markets and treasury solutions group under the leadership of former global head of DCM Miles Millard. The new group combines coverage teams from the old debt capital markets division with corporate banking teams and capital markets sales teams from Deutsche’s impressive global transaction banking group that previously sold cash management, payments and related services such as trade finance to corporate and financial institution clients, as well as some FX services and risk management.

Millard, now global head of capital markets and treasury solutions, portrays it as a natural evolution and says the bank is moving beyond building its disparate businesses, which inevitably occurred partly in separate silos, and now concentrating much more on delivering them to clients in a better-managed fashion.

"Clients don’t want to face multiple contact points when they talk to their banks," he says. "And while there are various touch points that we need to cover at clients from the individual dealer and assistant treasurer on upwards, treasurers and chief financial officers want to know that they are getting properly coordinated coverage."

"Specialist coverage officers develop relationships of varying depth. Bringing them into one coordinated effort is to everyone’s benefit"

Miles Millard, Deutsche Bank

Miles Millard, Deutsche Bank's global head of capital markets and treasury solutions
He adds: "We had become used to working in partnership with our corporate banking colleagues, who covered many of the same clients as DCM did but for treasury services. Now we are not only working in partnership but are one and the same team."


Bankers get nervous when they hear senior managers talk about better coordinating anything for the benefit of clients. Is this cost-cutting by another name?

Millard says rather that the aim is to increase market share. For example, the bank hopes to improve its cross-selling of DCM services to some of the smaller and medium-sized corporate clients that the old corporate banking team has already cultivated close relationships with through their use of cash management and payments. Similarly, it hopes that some large clients in the Middle East for which it has arranged wholesale financing might now be more inclined to use Deutsche for global transaction banking.

Millard, who now reports both to Ivor Dunbar, head of global capital markets, and to Werner Steinmueller, head of global transaction banking, says: "Specialist coverage officers develop relationships of varying depth. Bringing them into one coordinated effort is to everyone’s benefit." Pointing to one particular area of emphasis, Millard says: "The global markets side of CIB has a well-established leadership in emerging markets. Bringing together these coverage teams will be especially helpful in further strengthening our position in these growth markets." The bank now has many multinational clients investing in both Asia and Latin America for which the management of cross-market cashflows is becoming increasingly important.

It remains to be seen if this combined coverage model is one that other large banks with big cash management payments and transaction services businesses, such as HSBC, Citi and JPMorgan, might also adopt. One source at a rival European bank suggests: "It might not be so easy. Remember that what Deutsche Bank calls DCM is already a combination of much more than financing, and also includes FX, risk management, and commodities that still remain more separate at a lot of other banks. Its rivals would probably need to integrate those before combining coverage with transaction banking." He adds: "Deutsche is a universal bank dominated by the investment banking side and, with that model, has shown surprising resilience."

As for Deutsche’s outlook, Millard is optimistic. "We had tremendous momentum in 2010 on the DCM side where we made investments around the sovereign space, added resources in emerging markets and took market share across the board. In 2011, it will be more of the same. Banks need capital, funding and liquidity. Governments have deficits they need to finance. Emerging markets are growing and need to fund investments. That will drive the opportunities."

But he sees plenty of clouds on the horizon too. "The market will most probably continue to experience periods of disruption as concerns around peripheral European sovereigns continue to weigh on sentiment," he says.