Deutsche Bank bets big on China business rebound
Frankfurt-based lender has been strengthening its capital markets teams even as rivals cut jobs
Deutsche Bank is sharpening its focus on the China business to capitalise on gaps created by the withdrawal of its investment banking rivals, betting on the world’s second-largest economy to build on its post-Covid recovery momentum, according to the firm’s Asia-Pacific CEO.
The bank, which first set up shop in China in Shanghai in 1872, or seven years after HSBC, has been strengthening its corporate finance division and enhanced its presence in the debt and equity capital markets over the past two years amid a slump in deal-making and share issues.
“We know that many of our competitors are reducing capacity in this business, in Hong Kong and elsewhere,” Alexander von zur Muehlen said in an interview. “That gives us a unique opportunity to operate in a kind of countercyclical way, and be strategic.”
The Frankfurt-based lender last month named Michael Hufton from Morgan Stanley as co-lead of its infrastructure and utilities division for Asia-Pacific, adding to its hiring spree that included veteran deal maker Samuel Kim as chairman of mergers and acquisitions in the region, according to a Bloomberg report.
UBS was reportedly looking to axe 90 jobs across its private and investment banking units in Asia, mainly in mainland China, Hong Kong, Taiwan and Singapore. Bank of America in January announced around 20 job cuts in Asia, mainly affecting Hong Kong-based bankers and those working on China deals.
Initial public offerings in Hong Kong, Shanghai and Shenzhen tumbled in the first quarter, drying up advisory fees for investment banks. Several jumbo deals have since been put on hold or scrapped.
Sooner or later, businesses on the mainland would rebound and Deutsche Bank wanted to position itself to seize the moment, said von zur Muehlen, who is based in Singapore.
Deutsche Bank had 851 fulltime staff in Hong Kong last year, compared with 844 in 2021, according to its annual report. Its headcount on the mainland rose to 634 from 553.
Both markets, however, showed contrasting performance over those two pandemic years. Profit before tax fell to ¤74 million (HK$622.3 million) from ¤121 million in Hong Kong. On the mainland, its profit surged to ¤131 million from ¤89 million.
Von zur Muehlen emphasised the significance of the bank’s 152-year history of doing business in China, particularly in times of geopolitical uncertainty, adding one should not get distracted by some issues that markets were facing at the moment.
There would always be a need for capital, as China continued to open up and push for a wider international usage of the yuan, he added. This created an opportunity for Deutsche Bank to facilitate more cross-border activity from Hong Kong.
“Hong Kong has a unique position. It is the financial window to the world for China, both for inbound and outbound,” he said.
Hong Kong has a unique position. It is the financial window to the world for China
ALEXANDER VON ZUR MUEHLEN, CEO FOR ASIA-PACIFIC AT DEUTSCHE BANK