ECM vs equities: Has Deutsche Bank got it right?
Deutsche Bank has taken the radical step of getting rid of its equities business, but thinks it can still offer ECM. Can it?
Deutsche Bank CEO Christian Sewing
Deutsche Bank’s exit from global equities, through the transfer of its prime finance and electronic business to BNP Paribas and the shuttering of most of the rest, understandably raised eyebrows when it was accompanied by CEO Christian Sewing’s assurance that the bank would continue to offer a “focused” equity capital markets (ECM) service to clients.
How, many wondered, could this be possible? After all, the received wisdom for decades has been that the two businesses operate in lockstep and that to be truly credible in primary ECM required the secondary market intelligence that only a big equities sales and trading platform could provide.
Indeed, Deutsche first broke into the upper ranks of the ECM arranger rankings on the back of its secondary trading prowess.
However, times change. The reality is that while this may have once been largely true, it has not been for many years.
ECM bankers know this, even though many are reluctant to admit it publicly. For the moment they want to seize the opportunity to tell clients how Deutsche cannot be expected to serve them properly now.
Many issuers, particularly the inexperienced, may well believe them, on the basis that surely something must have been lost at a firm that is closing a big, apparently related business.