Technically, the withdrawal of Deutsche Bank from Latin America – shuttering its operations in five of the six countries in which it had a physical presence and reshaping its strategy in Brazil to be less ambitious in terms of winning investment banking mandates from local companies – is important news.
As one of the banks with a reputation for ‘stickiness’ (unlike, for example, Goldman Sachs and Morgan Stanley that have the reputation for repeatedly scaling up and pulling out of Latin American markets) its retreat is further, and solid, proof that global banks’ ambitions in the region have drained away. Some of course remain, but in large part global investment banks are pulling out.
While symbolic and sad news for those directly affected, the move from Deutsche Bank won’t change the strategic landscape in any of its markets. The German bank was a significant player in Brazil and Mexico but far from dominant. Dominance lies with the locals and it is likely to be them that benefit, at the margins, from one less international competitor.
However, the main reason Deutsche’s move is only technically important is because investment banking activity in the region is quite depressed – it has been for a while and is likely to be in the near future. ECM and DCM volumes are much lower than in recent years, around the region, and M&A has not picked up to compensate.
That’s why when you speak to local banks about the impact of one less competitor in their market there is no trace of pleasure: they would rather be enjoying a smaller proportion of a much larger pie than dominating the crumbs that remain.