Tag Archives: Christian Sewing

Rich Asians Give Deutsche Bank Crazy Growth Potential

In Deutsche Bank AG Chief Executive Officer Christian Sewing’s push to get back into growth mode, there’s one specific business in which there are pretty much no hiring limits.

The private bank in Asia is still recruiting, even after bringing on board about 100 relationship managers and support staff in the first half, Lok Yim, who runs the Asia-Pacific wealth business, said in an interview. “I don’t think there’s a limit apart from what we can digest,” he said.

Few businesses offers such eye-watering opportunities for global banks right now as catering to Asia’s swelling millionaire class. While Sewing has cut thousands of jobs elsewhere, in Asia he’s locked in a battle with banks from Credit Suisse Group AG to Morgan Stanley for the bankers who can bring in wealthy clients — and generate revenue from them.

“We’ve been having strategy papers with Christian Sewing,” Yim said. “The discussion is about ‘how much more would you like to grow?’" he added.

Read about how not even fruit bowls are safe in Deutsche Bank’s cost clampdown

Since taking over in April, Sewing has announced plans to cut at least 7,000 jobs and retrench in investment-banking areas such as prime finance and U.S. rates. More recently, however, the CEO has talked about the need to expand some operations. Wealth management in Asia, the Americas and Europe has been identified as among the bank’s most important areas for growth, according to its second-quarter earnings statement.

Asian Assets

The size of wealth assets under management in Asia is second only to Deutsche Bank’s home market in Germany, though overall growth has been subdued in recent years. Total AUM was 216 billion euros ($251 billion) at the end of June, little changed from a year earlier.

Yim said the bank had a strong first half in Asia with “a lot of client activity in the first quarter that carried momentum into the second quarter." AUM in the region edged up to 51 billion euros at the end of June, from 47 billion euros a year earlier, which Yim said was due to both new money inflows and movement in the value of financial assets.

Wealth Business

Deutsche Bank's Asia AUM is the largest after Germany (in billion euros)

Source: Deutsche Bank's second-quarter earnings presentation

Yim expressed optimism that the recent hiring of relationship managers will bring more rich clients to the bank. “With new colleagues coming on board we are hopeful that we will, over a reasonable period of time, bring new clients onto the Deutsche platform," Yim said.

Despite recent market volatility, Deutsche Bank is advising its wealthy clients in the region to maintain their investments rather than move into safe havens like cash, Yim said. “We do not feel that this is a time to stay in cash. If anything, we remain fully invested but in a hedged environment."

Yim said he is looking to technology and a focus on certain countries and markets in order to contain costs and “sustain profitability" at a time when he is adding new bankers. For example, the bank has exited the wealth business in Australia and Japan in recent years, and no longer serves European clients from Asia, Yim said.

“We want to grow, but sustainably and safely," Yim said. “But we are not going to hire people for the sake of hiring."

    Read more: https://www.bloomberg.com/news/articles/2018-08-09/deutsche-bank-has-one-area-where-sewing-sees-no-limits-to-growth

    Deutsche Bank Cuts Costs Again. Not Even Fruit Bowls Are Safe

    The list of perks at Deutsche Bank AG is shrinking fast.

    Investment bankers at Germany’s largest lender have been told to travel coach class on trains; fewer are able to attend conferences and some former employees said severance pay was less generous than previous handouts. Even small treats like the daily fruit bowls are disappearing.

    The frugal ethos described by half a dozen people with knowledge of the company’s policies reflects Chief Executive Officer Christian Sewing’s focus on saving after a series of botched turnaround efforts. The appointment of a new chief operating officer, Frank Kuhnke, as a direct report to Sewing is a signal that the CEO wants to have better control over processes and expenses. Kuhnke’s efficient yet blunt tactics have earned him the moniker ‘Frank the Tank,’ one person said.

    Sewing has been warning senior managers at the investment bank that if they can’t show they’re able to control expenses, he won’t trust them to be able to grow revenue either. Managers are being given fixed budgets that they must not exceed under any circumstances, said the people, asking not to be identified in discussing internal information.

    While a large part of the bank’s savings will come from a plan to lay off at least 7,000 people, Sewing is scrutinizing non-compensation expenses to change a culture where budget overruns were often seen as trivial, the people said. That’s especially true of the securities unit.

    ‘Negative Surprises’

    Sewing’s predecessor, John Cryan, had previously targeted more costly incentives like a NetJets account for top executives, but expenses still spiked in the fourth quarter of last year as the bank set aside hundreds of millions of euros for bonuses to stem defections. Cryan, who once said that he didn’t understand how “additional excess riches” drive people, later had to abandon a cost target, a decision widely seen as accelerating his ouster in April of this year.

    “Deutsche Bank has a history of negative surprises on costs in the fourth quarter, including last year,” Sewing said on an analyst call in late July. “That pattern ends in 2018.”

    A spokesman for Deutsche Bank declined to comment on the cost saving measures.

    Read more about Cryan’s efforts to cut costs here.

    Travel expenses are one focus of the cost cuts that are now being implemented. Investment bankers in London were scolded last year by the then-regional head of the unit, Alasdair Warren, for their profligate travel spending, one person said. The unit is also reviewing expenses for legal and compliance matters after comparing itself to other banks and finding it’s doing much worse.

    Internal processes have long been a focus of cost cuts at the lender, but the bank has struggled to simplify them. It said this month that internal reviews show its anti-money laundering processes remain too complex and there was a “need to improve in terms of internal processes.” Last year, the Federal Reserve designated the bank’s U.S. business as troubled and this year it failed the bank in its annual stress tests on qualitative grounds, citing “widespread and critical deficiencies” in its internal controls.

    ‘Frank the Tank’

    Kuhnke, the new COO, is taking a fresh look at processes and has already implemented projects — for example getting so-called know-your-customer documentation — that other managers previously failed to carry out. Deutsche Bank is also aiming to accelerate cost savings from the merger of its two German retail units, and it’s focusing on eliminating duplication in back-office functions and computer systems at its German headquarters.

    The bank has also been closing its office in Houston and shrinking the office in Chicago. Previous plans by DWS, the bank’s asset management business, to move to a new Frankfurt office were abandoned amid a stronger focus on costs.

    Cutting compensation expenses, however, won’t be easy. The CEO has promised shareholders that Deutsche Bank’s headcount will fall “well below” 90,000 by the end of next year and he would actually like to get the figure below 87,000, according to two people briefed on his thinking. But an agreement with labor unions prevents Deutsche Bank from firing domestic employees against their will until mid-2021.

    Bonus cuts won’t be easy either. The bank has signaled it won’t be skimpy on pay, at least not for its top performers. Compensation expenses in the investment bank actually rose in the second quarter despite a lower headcount as the bank continued to set aside money for future bonus payments.

    Deutsche Bank’s costs “remain stubbornly high as the group has to make up for a lack of investment in previous years, and German cost reduction is limited by union agreements,” Amit Goel, an analyst at Barclays Plc, wrote in a note.

      Read more: https://www.bloomberg.com/news/articles/2018-08-09/deutsche-bank-cuts-costs-again-not-even-fruit-bowls-are-safe