LONDON: Deutsche Bank AG has spent a decade shedding jobs, settling legacy litigation and undoing acquisitions that had gone awry after the financial crisis.
In his first major deal as chief executive officer (CEO), Christian Sewing is trying to avoid the mistakes of the past and emulate investment banking titan JPMorgan Chase & Co in a bet that a major London presence is still key to dominating financial markets.
Sewing has agreed to buy Numis Corp, one of the best-known UK boutiques, in a surprising change of pace for a CEO who has refocused Deutsche Bank on its existing strengths in corporate banking and fixed income trading.
Valued at £410mil (RM2.28bil), the deal is the firm’s largest since the 2009 purchase of retail lender Postbank and will take it from a few dozen bankers focused on UK offerings to one of the biggest teams in the City.
Deutsche Bank’s executives view the transaction as akin to JPMorgan’s tie-up with UK brokerage Cazenove & Co, widely seen as a success now that the US bank is the top initial public offering underwriter and second-ranked merger adviser on UK deals in the last five years.
Numis is the No 1 UK corporate broker by number of clients, ahead of Peel Hunt Ltd and JPMorgan Cazenove, according to data provider ARL, giving Deutsche Bank the opportunity to cross-sell advisory and financial products to those clients.
Corporate broking is a role unique to the UK financial landscape, where banks provide advice to companies on markets and the performance of their stock, sometimes seen as a glorified investor relations function.
Banks often parlay the low-paying relationships into more lucrative deal mandates or to provide other equity or debt-related products.
“Numis has created a very good position in London,” said Tim Linacre, a former CEO of stockbroker Panmure Gordon who is now deputy chairman of public relations firm Instinctif Partners. “With Deutsche’s Mittelstand focus, the two fit together well.”
A slump in dealmaking – and Numis’s resulting 46% stock slide over the past two years – allowed Deutsche Bank to pick up the boutique at an opportune time.
The lender viewed its investment as counter-cyclical, demonstrating a belief that the advisory and underwriting businesses will come back, the people said.
It’s also a vote of confidence in the UK’s economy and the city’s ability to remain a hub for public listings, they said.
But some analysts expressed scepticism, with JPMorgan’s Kian Abouhossein saying he was “surprised” the lender would buy an equity trading franchise after shuttering the business four years ago. — Bloomberg
