Deutsche Bank wins through in Euromoney's trade finance survey

COPYING AND DISTRIBUTING ARE PROHIBITED WITHOUT PERMISSION OF THE PUBLISHER: SContreras@Euromoney.com

By:
Kanika Saigal
Published on:

Its strong performance in Euromoney’s trade finance survey – despite its recent difficulties – has left some rivals scratching their heads. What lies behind its high placing?


Deutsche-bank-spin-R-780


TF-2019-logo

© 2019 Euromoney

Results index
Euromoney’s most recent trade finance survey results have upset some bankers following the surprise success of Deutsche Bank. But dig down into the results and the reasons for its resilient performance start to emerge.

The German bank moved from third to second place in Euromoney’s quantitative results globally, while maintaining its position of second place in the survey’s qualitative (customer satisfaction) results. Deutsche came second to HSBC in the quantitative results and to UniCredit in the qualitative results.

Regionally, Deutsche came top in Asia Pacific and Western Europe in the quantitative results and first in North America for customer satisfaction.

Turbulent past

The bank’s lofty position in Euromoney’s trade finance survey comes despite its recent struggles, including weak financial results, regulatory entanglements and cost cutting.

In December 2017, Deutsche was fined $630 million by British and American regulators in connection with a Russian money laundering plan. In 2018, the bank came under further scrutiny over its role as a correspondent bank for disgraced Danske Bank – the details of which are still unfolding.

Deutsche’s profits have suffered. In the third quarter of last year, the bank reported a 65% decline in net income at €229 million, down from €649 million recorded in the same period the year before. As Euromoney reported at the beginning of 2018, the bank’s global transaction banking revenues fell by 10.8% in 2017.


Christian_Sewing-160x186

Christian Sewing,
Deutsche Bank

In May 2018, new chief executive Christian Sewing announced that the bank would cut a total of 7,000 jobs, around 7% of its global workforce, as part of an extensive overhaul of the struggling corporate and investment bank.

With much of that work done, confidence in the bank plummeted once again in November last year, when the bank’s headquarters in Frankfurt were raided after allegations of money laundering.

The bank’s share price hit an all-time low on December 27, slumping to €6.75. By February 5, that had recovered slightly to €7.77, but it is yet to come anywhere near the €25 the bank hit in 2015.

Financial results for 2018, announced at the start of February, showed a first full-year profit since 2014, albeit a meagre €341 million: revenues were down 4% from 2017 but costs were down 5%. In the fourth quarter of 2018, the bank produced a loss, with overall CIB revenues down 5%, albeit within that global transaction banking revenues were up 5%.

“We have all been wondering how Deutsche Bank has done so well in the trade survey results, especially since the bank has been in meltdown,” says one transaction services banker based in New York. “We complete dozens of transactions a month, but Deutsche – the bank literally doesn’t have the balance sheet to do this.” 

Another banker based in London says: “We’ve been scratching our heads. I would go as far as to say the results can’t be right – Deutsche Bank has suffered greatly over the last year, and we can’t see how they could have done so well in the survey.”

Validity

But according to Daniel Schmand, head of trade finance at Deutsche, its resilience rests on its long history and dedicated clients in trade and treasury – and this is what is reflected in Euromoney’s trade survey.

Look more closely at the results, and it’s clear to see that Deutsche still has a base of dedicated large-cap corporate customers.

Indeed, if the results are narrowed to show the preferences of corporates worth $10 billion and above, Deutsche comes out first in both the quantitative and qualitative global results. And when it comes to customer satisfaction, using the same criteria as above, Deutsche leads second-placed Standard Chartered by a distinct margin.

“The trade finance business did what it always has done – got on with the job,” says Schmand.


Daniel-Schmand-2017-160x186
Daniel Schmand,
Deutsche Bank
In North America, Deutsche does well because the bank is considered a natural alternative to North American banks, he suggests, while success in Asia Pacific comes from a number of Belt and Road Initiative deals out of China. Indeed, according to Euromoney’s trade survey, Deutsche dominates the servicing of big Asian corporates.


Moreover, “we have a natural and deep understanding of emerging markets,” says Schmand. “As such, we are able to create bespoke solutions to a number of big corporates in China and the region.

“Trade finance is in our DNA and is part of who we are,” he adds. “Our customers know that we are there for them because, at the end of the day, they just want to get the job done by someone who knows trade finance inside out.

“Some of our trade finance is highly complex – particularly the structured commodity and structured export finance – and our experts have, more often than not, come to us from the engineering and construction sectors, bringing with them unique expertise and market insights.”

Euromoney’s trade finance survey is not solely based on profit, trade volumes, deals done, share price performance or negative or positive news flow. It is more granular than that.

Good service in a particular business segment is key. It trumps bad headlines and, absent concerns about a bank’s sustainability or commitment to a particular business – Deutsche Bank was created to finance German trade – this produces results.

As another banker summarises: “If a bank offers a product that is good, it won’t matter even if the CEO is in jail. But if a transaction takes 30 seconds longer than a customer expects, that’s when you’ll start losing business.”

In trade finance, Deutsche is gearing up for a busy year, says Schmand.