Abigail with attitude: Berenberg Bank – a lesson in the art of private partnership

By:
Abigail Hofman
Published on:
Some would say that Orcel’s pay package is yet another example of same old, same old. So it was exciting to come across an example of the new paradigm in the financial sector. What do I mean by that over-used phrase? In short, a firm that is doing things differently from the discredited big-bank universal model. I have been seeing the name Berenberg Bank a lot recently: often in connection with research calls on European stocks. My curiosity piqued, I was pleased when a friend introduced me to two of the firm’s senior management. In mid-March, I met Andrew McNally, head of Berenberg Bank UK, and Hendrik Riehmer, a managing partner, to learn more about the business. Berenberg is a small German private bank, headquartered in Hamburg, which can trace its origins back to the 16th century. It is a partnership, and the partners have unlimited liability for the business. Think about that for a minute. If Barclays had been a private partnership, would any senior manager have taken home millions of pounds during a period when the bank incurred billions of pounds in fines for mis-selling products and wrote down billions of pounds on loans and bonds undertaken during the boom years? If UBS were a private partnership, I doubt that Ermotti would earn SFr8.9 million in a year when the bank lost billions of Swiss francs. Berenberg Bank’s activities include private banking, asset management and a focused investment banking franchise. The firm has about €28 billion under management, liable equity of €221 million and employs approximately 1,000 people. Berenberg is becoming known for the strength of its equity research platform and cash equities business. In the early noughties, this effort was focused on European small and mid-cap companies, but the research platform has been broadened since 2007 to include larger companies. The Berenberg duo were passionate about what they did. The website talks pithily about ‘values of personal commitment, reliability and responsibility’. Riehmer was the first banker I have heard who questioned openly whether or not a wealth management division benefits from being twinned with an investment banking business. This is the mantra that UBS and Credit Suisse have been espousing for the past 10 years. Riehmer pointed out that supposed synergies might be limited and conflicts of interest myriad. “The social purpose of investment banking is to connect capital with corporates,” mused McNally, “not to make greater profits for the bank’s proprietary book.”

I was intrigued that the bank does not offer structured products to its private clients. For a while, I have thought that the attempts of many private bankers to lure their clients into such deals were foolhardy and reflected more the banker’s desire for commission than consideration of their clients’ best interests. I left the meeting impressed. I look forward to hearing more about Berenberg Bank.