finews.asia examines what the «most fundamental transformation» at Deutsche Bank means for its private banking division.
Amidst what CEO Christian Sewing has called its most «fundamental transformation» ever, Deutsche Bank unveiled sweeping changes on Sunday that included axing its equities business as well as 18,000 jobs, as finews.asia already reported.
For its wealth management unit, which manages $243 billion in client assets, the changes are nuanced but significant.
Cut Costs, Increase Headcount
Amidst bank-wide cost cuts of 6 billion euros, Deutsche expects to save 1.4 billion euros in costs by 2022, largely through the integration of Deutsche Bank and Postbank in Germany; 200 million euros of these savings «will be delivered in the current year», according to a detailed statement put out by the bank.
However, employees at its London-headquartered international wealth management division insisted last night that their mandate was «to continue to grow headcount aggressively», despite the cost-conscious environment.
Focus on Asian Entrepreneurs
Leveraging its corporate relationships in Germany is the clear mandate for wealth management, whereas in Asia the bank hopes to continue to woo the region’s rapidly growing billionaire entrepreneur population.
Industry estimates peg Deutsche’s wealth management assets in Asia at $60 billion, well behind industry-leaders UBS and Credit Suisse but significant nonetheless in what is an otherwise fragmented market. Its’ industry-leading Non-Resident Indian (NRI) and onshore India business is another area where the bank continues to invest with a new team hire reportedly in the works.
More Balance Sheet, Less Product
A surprising upside from the reorganization will be the additional balance sheet that will become available for wealth management because the bank is likely to earn more from lending to individual clients than it is from its institutional clients.
Sources at the bank confirm that it has been lending «aggressively» to UHNW clients and bankers have been told any changes to credit policy going forward will be towards looser lending.
Crucial Component
However, a crucial component of Deutsche’s appeal to the ultra-wealthy was the access it was able to provide via its investment bank to deal flow. Many of the structured lending solutions, club deals and private investments Deutsche was able to offer clients were a direct result of its investment banking prowess.
Without this constant drip feed of sophisticated products, the platform begins to be skewed towards lending rather than a product business.
