Three years after a radical overhaul of its business, Deutsche Bank is eyeing an investment banking renaissance that will see it challenge European rivals on home turf.
The German lender aims to become the leading European investment bank in the region, senior executives said. financial newsas it comes to the end of a cost-cutting program introduced in 2019 that will eventually cut 18,000 jobs.
Deutsche is ramping up its ambitions for its European trading unit, hiring bankers and eyeing European rivals in the tariff league tables. Its goal is to beat the likes of Barclays, BNP Paribas and Credit Suisse, the executives said.
Henrik Johnsson, co-head of European investment banking at Deutsche Bank, said the bank aims to expand, despite the trading downturn in 2022.
“The pause in the markets currently has come at a good time for us,” he said. “Last year, one of the biggest problems we faced was that we didn’t have enough staff for the amount of business that needed to be done. But we have been hiring, particularly on the coverage side, and this buys us some time to re-engage with clients and rebuild.”
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Deutsche Bank dominated the Emea investment banking fee league tables until 2016, when it was overtaken by JPMorgan, which has held the top spot ever since. The German lender was fined $7.2 billion by US regulators that year for fraudulently selling mortgages during the 2008 financial crisis.
This was the start of a crisis for the German lender, with its investment bank a key source of problems that led to successive losses. After numerous attempts at change, in June 2019 CEO Christian Sewing revealed a plan to shed more than $300 billion in unwanted assets and cut 18,000 jobs as he sought to downsize his operations.
Within its investment bank, Deutsche exited stock trading and refocused its trading unit around key strengths such as debt capital markets and leveraged finance. He also continued to work in the equity capital markets, despite his exit from trading.
Deutsche’s 2019 overhaul timed a two-decade attempt to come toe-to-toe with Wall Street rivals. The German lender acquired Bankers Trust in 1999 in a bid to counter the dominance of US megabanks, but like many of its European rivals, it was forced to downsize in the wake of the 2008 crisis.
Wrapping up a three-year restructuring, Deutsche’s renewed push for growth could be seen as a model for European rivals that have had to make painful decisions to downsize their investment banks over the past decade.
Credit Suisse, once the world’s leading European investment bank, is the latest company to scale back its business. It is due to unveil a new strategy on October 27, which will seek to regain the confidence of investors and clients after a series of scandals, including a $5.5bn loss from the collapse of family office Archegos Capital. The Swiss bank is expected to cut thousands of jobs and reshape its investment bank around so-called capital-light functions such as mergers and acquisitions.
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Johnsson said that Deutsche is now once again looking to grow. Having invested in senior UK market dealmakers, including former Barclays dealmaker Daniel Ross to lead the team, it is also looking to bolster bankers in the sector and gain ground in mergers and acquisitions.
Deutsche has also regained the top spot in its home market of Germany and aims to replicate that success in other parts of Europe. “We will continue to build in other countries as well,” Johnsson said.
After a deal boom in 2021, which generated a record $130 billion in fees, banks scrambled for the best dealmakers, inflating salaries and paying extraordinary bonuses to retain key staff. Johnsson said the bank is likely to hire in 2023 and is positioning itself for the next boom.
“Our growth plans are focused on advisory and mergers and acquisitions,” he said. “It is an area that we want to grow in and it is also one that you have to be in for the very long term. It can take years: you have to hire the right people, support them and be patient, and that’s what we’re trying to do. We’re playing for the next M&A boom, which could be three or four years from now, but we’ll be in a position where we can really capitalize.”
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