Bucking the trend: A Deutsche Bank sign in Brussels. The bank is recruiting on expectations of improving conditions in Asia. — Reuters
SINGAPORE: While some lenders are tightening the reins amid falling fee income and shedding staff, Deutsche Bank (DB) is going in the other direction.
The German bank is selectively increasing headcount in divisions such as investment banking and private banking, strengthening core functions to maintain market share and setting itself up to capitalise on what it believes will be a rebound in the global economy.
President and chief financial officer James von Moltke told The Straits Times recently its strategy was made possible after a major restructuring in 2019 saw it cut costs and hive off unproductive divisions.
DB’s management then decided to refocus on four core divisions, a move that involved splitting corporate from investment banking into two separate business lines alongside private banking and asset management.
While the restructuring was well executed, von Moltke admitted the bank may have pulled back too much in some areas and there was a need to re-establish these to maintain market position in what it had defined as core businesses.
With the current slump in mergers and acquisitions (M&As) and capital market deal flows having slowed, the German giant now sees opportunities to hire good people to beef up its investment banking division.
This comes as other major lenders like Goldman Sachs and Morgan Stanley have laid off staff in their deal-making units after having over-expanded before the pandemic. Meanwhile, the demise of Credit Suisse has also led to an exodus of investment bankers and relationship managers.
Von Moltke estimates that as many as 400 such professionals have been laid off in Asia alone. This has allowed DB to add around 50 senior people globally to its investment bank in four to five months, with about a third based in Asia, underlining the region’s importance to the German bank.
DB has two hubs of operation in Asia, one in Hong Kong serving North Asian markets, and the other in Singapore, which serves South-East Asia and India.
In Singapore, DB occupies a major portion of One Raffles Quay’s 29-storey South Tower that houses more than 2,000 staff.
Among its four core businesses, the private, corporate and investment banking arms account for the lion’s share of the headcount.
Meanwhile, the investment banking industry as a whole has been experiencing a rough patch, as reflected in a June report by Refinitiv.
It showed investment banking fees in Asia Pacific excluding Japan fell 20% year-on-year to US$12.8bil for the first half in 2023, its lowest level since 2020.
Meanwhile, deal-making activity in the region tumbled 37.5% year-on-year to US$340.6bil in the first six months of this year, as earnings from M&As sank to their lowest point in a decade, the Refinitiv data showed.
Deal flows in the capital markets have also been hit. Proceeds from equity capital markets were down 17% year-on-year to US$112.3bil for the same half-year period, with new issues plunging to a two-year low.
Maybank Securities equity research head Thilan Wickramasinghe noted “investment banking fees contribute a larger portion to overall fee income for global banks in Singapore.”
He also noted that “there could be some downside impact on overall earnings for these banks from a slowdown in investment banking”.
However, Wickramasinghe felt with the possibility of averting a recession during the current cyclical slowdown in economic growth gaining more traction, there could be an increasing appetite for funding and M&A activities. — The Straits Times/ANN
