Deutsche Bank's Cuts Complicate Steps to Expand Asia Clout
Job cuts, restructuring by Deutsche Bank risk making it harder for it to claw back market share at its surviving Asian units.
(Bloomberg) -- Job cuts and restructuring announced by Deutsche Bank AG this week risk making it harder for the German lender to claw back market share at its surviving Asian units.
Over the past five years, Deutsche Bank has fallen down the rankings for Asian debt capital markets and wealth management, while it has lost the top spot to rivals in fixed-income, currencies and commodities trading. Despite these slips, the businesses contributed to a record profit for the firm in the first quarter of 2019. But retrenchments in equities, research and investment banking could make it hard to maintain that performance.
“If I’m with Deutsche Bank and I’m a good performer, if I get an offer from some other firm that can better support my work with research, a global franchise, stronger flow of investment banking deals, I will probably go there,” said Sanjay Jain, head of financials at Aletheia Capital Ltd., one of Asia’s biggest independent investment-research firms.
The risk is that an exodus of Asian employees would break crucial business links and test the firm’s resolve to stay “absolutely committed” to the region. Even before this week’s cull, several senior credit traders had left Deutsche Bank last year for regional competitors such as Standard Chartered Plc.
Deutsche Bank saw its wealth management assets in Asia outside of China fall 4.6% in 2018 from the previous year, even though it boosted the number of relationship managers by 12%, data from Asian Private Banker show.
Assets under management at the bank’s wealth business in emerging markets, including Asia, rose 10% in the first quarter of 2019 from a year earlier, a Deutsche Bank spokeswoman said by email. Revenue grew by double digits last year at businesses including the private banking unit, as well as Deutsche Bank’s key markets of China and India, she said.
Deutsche Bank is also facing stiffer competition from Chinese and Indian brokerages in capital markets that value knowledge of local languages and customs, and have entrenched ties with the nations’ state-run or family-owned businesses.
Its pullback from Asian equities means it could lose market share to Chinese rivals, said Sharnie Wong, an analyst at Bloomberg Intelligence. Stock coverage is vital, due to growing inclusion of Chinese shares in global indexes.
“Any impact from the recent changes in the investment bank is expected to be largely manageable, partly because the areas that provide the kind of services our clients use will be relatively less affected,” Deutsche Bank said.
The firm cannot be complacent about debt capital markets either. Deutsche Bank ranked third for underwriting of Asia ex-Japan bonds denominated in dollars, euro and yen as recently as 2015. But it’s currently in ninth place this year, and was No. 11 in 2018. To be sure, the bank’s ranking in the high-yield G3 currency bond underwriting league tables is higher: third so far in 2019, up from eighth in the whole of last year.
Deutsche Bank expects growth across all areas of fixed-income and currencies, the spokeswoman said, pointing to top or improving rankings in certain sub-sections of the market such as global credit trading or the Euromoney FX survey. Deutsche Bank had a record first quarter, Werner Steinmueller, APAC chief executive officer, said on Monday. He was referring to profit, the bank representative clarified on Thursday.
The firm may look to use its relative strength in fixed-income and currencies trading to cater to multinationals’ needs for transactions and cash management, Bloomberg Opinion’s Nisha Gopalan wrote on Monday. While it lost the No. 1 ranking, Deutsche Bank is still among the top three in the Asian market, according to data from Coalition Group.
China will continue to raise money and Deutsche Bank can feed these deals into its global network “in a way that can’t be matched by local Chinese competitors,” said Brock Silvers, managing director at China-based fund Kaiyuan Capital. “The cutbacks in the Asian equities business may hamper these efforts, but won’t stop them.”
To contact the reporters on this story: Alfred Liu in Hong Kong at aliu226@bloomberg.net;Denise Wee in Hong Kong at dwee10@bloomberg.net
To contact the editors responsible for this story: Sam Mamudi at smamudi@bloomberg.net, Jeanette Rodrigues, Katrina Nicholas
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