Last week Deutsche Bank reported earnings for the first half of 2023. It was one of the banks to show a very healthy profit. This is of particular importance bearing in mind how M&A deals dried up across most of the investment banking landscape since the end of 2022.
The situation at Deutsche Bank is very different today than it was a few years ago. Back in 2020 the bank was trying to catch up with JP Morgan and others when it comes to technology investment. Today, the bank continues to strengthen its offerings in investment banking, wealth management, corporate banking and asset management. Advisory revenues have decreased at Deutsche Bank as fewer M&A transactions are completed. However, investment banking was always one of the strengths of the German bank.
The wealth management division of the bank reported record net revenues for the second quarter of 2023. $6.7 billion compared to $5.7 billion a year ago. More importantly the pre-tax income was $1.7 billion which gave a pre-tax margin of 25.2%. But that won’t be the focus of our story today. It’s not where Deutsche Bank is hiring the majority of its talent today.
In his comments, Christian Sewing, CEO of Deutsche Bank, mentioned how “the first half of 2023 demonstrated good growth momentum across a diversified business portfolio, underlying earnings power and balance sheet resilience.” Sewing also added how the bank leadership “are determined to continue on this path while accelerating the execution of our Global Hausbank strategy as we promised.”
What is the Global Hausbank strategy?
People often want to talk about investment banking services when thinking of Deutsche Bank. It is related to the legacy of the bank in its push into Wall Street many years ago. The Global Hausbank strategy must then refer to how the bank is increasing its offering towards Main Street. Or does it?
Interestingly, 2022 was a record year for investment banking services at Deutsche Bank. The bank posted net revenues of €10 billion in 2022. For the same period revenues in fixed income and securities were €8.9 billion, up 26% year on year and the highest for a decade.
So the loss of investment banking revenues is only a blip. For now.
But back to the Global Hausbank strategy and what it all means. To help understand the strategy better, Deutsche Bank released an Investor Deep Dive in 2022.
The definition of a ‘Hausbank’ is a bank that acts as the primary relationship banker to a company, providing or arranging a variety of credit related services. The explanation on the Deutsche Bank site strengthens this message:
“Deutsche Bank aims to become the first point of contact in all financial matters aspiring to help clients navigate through geopolitical and macroeconomic shifts and accelerate their transition to a more sustainable and digitized economy.”
In short. It’s all about growth and providing returns to investors.
The Numis Acquisition
The market was surprised to hear about Deutsche Bank’s £410 million acquisition of Numis, a leading UK corporate broking and advisory house, in April this year. However, Numis fits well with the Global Hausbank strategy, Sewing shared with Bloomberg only a few weeks ago.
Deutsche Bank stated that the transaction would allow the bank to accelerate its Global Hausbank strategy by unlocking a much deeper engagement with the corporate client segment in the UK. It will also help the bank to leverage its Origination & Advisory services. A key part of the Global Hausbank strategy is to build long-term relationships with large corporates. Something that Numis will be well placed to facilitate. Especially in the UK which remains a key market for the German bank.
But the acquisition of Numis isn’t enough on its own. Deutsche Bank has also been bringing in talent to help complete the overall strategy
Why is Deutsche Bank spending so much on Talent?
Even with a downturn on the horizon, Deutsche Bank have been hiring talent for several months now. The investment banking division is where one of several new hires joining from Credit Suisse is Alessandro Pelleriti, Director – Credit Trading joined. Other hires from Credit Suisse include William Mansfied and Lim Zi-Kuan. Both leading figures in M&A at Credit Suisse previously.
After familiarizing yourself with a recent story by the Financial Times, the extent of the hiring spree becomes clearer. An interview with Fabricio Campelli, Head of Corporate Bank and Investment Bank at Deutsche Bank, is summarized in the story. He confirms that investment in advisory is under way at the bank. This has led to 26 managing directors being recruited since the start of 2023. On top of that there are now 344 trading, research and capital markets staff that are joining from Numis.
The importance of this move by Deutsche Bank is how it is happening whilst other global investment banks have been making cuts in front office teams. This approach, supported by good revenues and a strong balance sheet, can all help the bank return to being a top 10 M&A firm.
Sewing’s final thoughts are on the topic of technology. Him and his entire team strongly believe in innovation. But most importantly, Sewing is clear on how banks will become technology firms in the near future. For now that means an increase in focus on AI. Where Deutsche Bank and Citi are second to JP Morgan only in amount of job adverts released this year.
Author: Andy Samu
#Hausbank #DeutscheBank #Numis #InvestmentBanking #Origination #Advisory
See Also:
‘Why I’m suing Deutsche Bank for $150 million’ | Disruption Banking
Deutsche Bank explains why they’re spending so much on tech at Money 2020 | Disruption Banking
Why is Deutsche Bank focusing on ESG? | Disruption Banking
Why is Deutsche Bank Spending so Much on Tech? | Deutsche Bank Technology (disruptionbanking.com)
