Deutsche Bank Tightens Conditions for Loans to Wealthy Clients
Deutsche Bank AG has tightened lending conditions for wealthy clients since the onset of the coronavirus pandemic, even as demand for loans to the world’s rich rebounds, according to the head of its International Private Bank.
“We took a more conservative approach to collateral from sectors and industries affected by Covid-19,” Claudio de Sanctis said in a telephone interview, singling out aircraft, commercial real estate, retail and travel. That continues to be the case even as the bank is “supporting our clients, which is reflected in our loan growth in more recent months,” he said.
Deutsche Bank joins others in paring back risk on loans to rich clients in some sectors, despite the world’s biggest wealth managers seeking to boost lending to shore up revenue. Credit Suisse Group AG has reviewed its risk appetite at it’s international wealth management unit, Bloomberg reported in May.
De Sanctis’s comments echo those made by Deutsche Bank Americas head Christiana Riley at a Bloomberg event last week, when she said that the lender has “dialed back” its risk appetite for commercial real estate. The business has long been one of the bank’s most significant revenue sources in the U.S.
Deutsche Bank has 46 billion euros ($54.6 billion) of loan exposure to the sectors highlighted by de Sanctis plus oil and gas, according to its third-quarter report. That’s equivalent to 11% of the total loan book, though the sectors accounted for almost a third of the bank’s credit provisions.
The bank has to balance the need to manage risk carefully during a pandemic with its strategy to increase lending as a way to offset the adverse effect of negative interest rates on revenue.
Deutsche Bank’s wealth management unit saw “deleveraging” in the first quarter and then “a strong rebound” in loan growth during the subsequent two quarters that has carried into the current three-month period, de Sanctis said.
The unit navigated the credit crunch sparked by the virus in April “with the relevant attention but without getting hysterical,” he said, adding that Deutsche Bank acquired clients from other lenders as a result.
De Sanctis was recently promoted to head a new division combining his wealth management unit with oversight of Deutsche Bank’s retail operations in Spain, Italy and India. Revenue at that unit, now known as International Private Bank, declined by 1% during the first nine months of the year.
The combination of the two units is expected to yield significant cost savings, though de Sanctis declined to comment on specifics ahead of the bank’s next investor day scheduled for Dec. 9.
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