Deutsche Bank Moves Fixed-Income Trading Business Back to Brazil

(Bloomberg) -- Deutsche Bank AG, the German lender that cut investment-banking jobs in Brazil last year, is moving businesses back to the nation on a bullish view of the new government’s economic agenda.

After cutting costs in the Latin American nation 40 percent last year, Deutsche Bank is moving its fixed-income and currencies trading businesses to Sao Paulo from New York City, Maite Leite, the Frankfurt-based company’s chief country officer for Brazil, said in an interview. Two investment bankers will relocate there from New York to cover clients, and a director will be hired as local head of multinationals for global transaction banking, Leite said.

The moves don’t mean Deutsche Bank is increasing its headcount in Brazil. The company is shifting 20 to 30 jobs from middle- and back-office divisions out of the country to its hub in Jacksonville, Florida, over the next 18 months. It has 150 employees in Latin America’s biggest nation.

“Our focus now is on revenue, in trying to broaden the scale of our operation here in Brazil and the relevance of our business locally and globally,” Leite said.

Deutsche Bank exited Argentina and Mexico in 2016 and cut its team in Brazil in half, moving trading elsewhere, as part of a plan to eliminate about 26,000 jobs worldwide in two years. It also said it would shut operations in Chile, Peru and Uruguay.

Leite sees a “more positive environment” in Brazil with the election in October of a new government with what she views as business-friendly proposals. The political shift prompted her to seek more resources from the company. Michael Spiegel, Deutsche Bank’s global head of cash management and regional head of global-transaction banking for Germany, visited Brazil in October and was also impressed, she said.

The transfer of the fixed-income and currencies trading books back to Brazil, which started in November, will require only “marginal investments,” according to Leite, because all the infrastructure had remained in the nation and was being underutilized. No hiring will be needed for that business, because the bank plans to shift two Sao Paulo-based employees to jobs involved in the effort, she said.

Hedging Products

“We now have the ability to offer more sophisticated, flexible hedging products for clients than before,” said Ricardo Cunha, a managing director responsible for the fixed-income and currencies business at Deutsche Bank Brazil. He cited options and Libor hedging in the local currency as examples.

Cunha said his goal for this year is to boost revenue 50 percent at the businesses he’s responsible for, which include structured credit and underwriting international bonds.

He expects the new government’s policies will stimulate economic growth, fueling the need for companies to raise capital, and estimates total issuance of international bonds from Brazilian companies, banks and the government to reach $25 billion this year. That would be up from last year’s $15.8 billion, according to data compiled by Bloomberg.

Cunha also foresees a pick-up in mergers and acquisitions as international investors buy more companies in Brazil, which would spur demand for bridge loans. Cunha said the bank is planning to increase its total exposure to Brazilian companies’ credit risk, but declined to provide a target.

Deutsche Bank has 1.6 billion reais ($435 million) in equity in Brazil, which the bank expects to be enough for this year’s planned growth, Leite said.

“There was some anxiety about the economic team Finance Minister Paulo Guedes would choose,” Cunha said. “Now it’s been defined, and the bank’s management is viewing it in a very positive way.”

Leite said she’s so optimistic about the new government that she isn’t bothered by some of the remarks made in the past by the new president, Jair Bolsonaro. He once told a congresswoman she “doesn’t deserve to be raped, because she is very ugly,” and said, “I’ve got five kids but on the fifth I had a moment of weakness and it came out a girl.”

Bolsonaro’s comments “never annoyed me, I never felt directly affected by his quotes,” Leite said. Experience working in banks’ treasury departments and trading floors exposed her to “very masculine environments,” she said, helping her “navigate with tranquility” in those types of situations.

“My concern isn’t with the president’s rhetoric, but to see Brazil grow again, create jobs, get better infrastructure,” she said.

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