The Hindu Business Line
Brexit, a threat to Germany’s investment bankers
Germany’s beleaguered investment bankers could face even more competition when rivals move staff to the country after Brexit.
While relocations from the UK will initially have little effect, that may change if banks then use their newly-established presence in Germany to expand in the local market for investment banking services, said Joachim Wuermeling, the head of banking supervision at the Bundesbank.
“This is a dynamic business, and it may well be that when they wake up in the morning and look around them, they may see that they have further opportunities on the ground,” he said. “Frankfurt’s financial centre will become more international and more competitive.”
Such a trend would mean more pain for firms such as Deutsche Bank AG. While Wuermeling did not name any banks, the Frankfurtbased firm is Europe’s biggest investment bank by revenue and has been losing market share to US rivals. After a series of failed turnaround efforts, it is now studying a merger with smaller German rival Commerzbank.
Both companies have recently emphasised their German roots, but competition for corporate clients in their home market has eroded margins. Commerzbank this year cut its revenue outlook because of that, though new competitors keep entering. Dutch lender ING Groep announced in 2018 that it wants to increase its German corporate banking staff by 50 per cent over the next three years.
Wuermeling and other European banking supervisors have said they are neutral in assessing a potential merger of Deutsche Bank and Commerzbank.
Any merger is first and foremost a decision for the markets and, in particular, for the owners of the banks involved, said Wuermeling of the deal talks. If this happens, supervisors will pay it the highest degree of attention.
A deal between the two German banks could lead to the loss of as many as 30,000 positions, people familiar with the matter have said. Brexitrelated relocations of bank jobs to Germany may help offset some of that.
Wuermeling said he expects about 2,000 jobs to be moved to the country by 24 banks this year alone.