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Deutsche loses ground at home

Sept 17,2018
German manufacturer Voith has been a customer of Deutsche Bank for more than a century. But as the maker of hydropower and paper plants expands abroad, it said it has started to hire other international banks where it would have previously considered Germany’s largest lender.

That could be bad news for Deutsche, which was founded in 1870 to help companies with overseas trade. In April, it said it would refocus on German customers as part of a push to restore the edge it has lost in the decade since the 2008 financial crisis.

The new strategy is getting a cool reception at home. Voith and other German companies such as auto parts maker Bosch have turned to rivals, and Deutsche’s share of its home market has diminished.

“German banks have lost ground compared to their international competitors,” said Voith group treasurer Michael Hannig. “We had to differentiate and allocate our business also across some international banks.”

Reuters spoke to 10 executives of German companies that are current and former clients of Deutsche who said they did not feel valued by the bank. Interviews with more than 35 politicians, investors and public officials found that many of them are worried about the bank, which has a $1 trillion-plus balance sheet.

The bank says clients are happy with its work. It has cut risky investments, simplified its structures and settled most large court cases. “We are getting very good feedback from our clients,” said Karl von Rohr, Deutsche’s co-deputy chief executive officer. “What is clear: You cannot be successful if you are not successful in your home market.”

Nevertheless, it captured just under 10 percent of the market share of investment banking fees for mergers and takeovers involving German companies so far this year and in 2017, according to Dealogic. That is up from a 4 percent share among global competitors in 2016 but far below a 30 percent share in 2008.

Deutsche posted a loss that year, but Josef Ackermann, chief executive at the time, boasted of the bank’s strength as rivals turned to their governments for rescue packages. The bank’s trading in global stocks and bonds, the forte of its investment banking arm, rebounded and helped it to return to profit in 2009.

But problems were accumulating. The European debt crisis followed the financial crisis, and Deutsche was facing lawsuits for wrongdoing in several operations. It has reported losses since 2015, and a $7.2 billion fine last year for its role in the U.S. mortgage market was a major blow that spooked clients. From a market value of 47.4 billion euros ($54.5 billion) at the start of 2008, Deutsche is now worth just 20 billion euros.

Christian Sewing was promoted to chief executive in April as the bank embraced its new strategy. With a background in risk management and retail banking, he is the first German to run the bank as sole chief executive since 2002.

Reuters