Deutsche Bank sees big boost from region

PHOTO: Deutsche Bank sees big boost from region
Gunit Chadha, Deutsche Bank's co-chief executive officer for Asia Pacific.

Economic growth globally and in Asia is expected to lift the performance of Deutsche Bank's businesses in the region, such as investment banking and wealth management.

Gunit Chadha, its co-CEO for Asia Pacific, said that the bank was on track to meet the group's stated objective of doubling earnings in Asia Pacific between 2011 and 2015. This is equivalent to an annual compound growth rate (ACGR) of 20 per cent in the period.

The bank has forecast global growth of 3.2 per cent this year and 4 per cent next year. The US is expected to grow 2.9 per cent, and Europe to emerge from recession this year. China is forecast to grow 8-8.5 per cent this year, and Singapore, 3 per cent.

Such optimism is likely to be reflected in renewed activity in markets. Said Mr Chadha: "As equity flows come back, that will drive the custody end of transaction banking. As investment banking comes back, there will be more M&As (mergers and acquisitions); credit finance will increase, which will boost our fixed- income business.

"As risk comes back, the wealth management business in China, India and Singapore will have a significant leg up. So we're very constructive of our businesses in the future.

"We need to deepen our franchises in India and China, and invest more in Asean - which is what we're doing - grow our markets in Australia and Japan, and make sure our cost structures are optimised."

Last year, the bank announced strategic targets up to 2015. It is also cutting its headcount by nearly 2,000 jobs, mostly in investment banking. The latter weathered a difficult year last year with the uncertain economic outlook and a steep drop in deal flow.

Other banks are also rationalising. UBS, for instance, unveiled 10,000 global job cuts and a scaling back of its investment banking business.

"Every investment bank is optimising cost structures in the cash equity business and deeply focused on prime finance. Will there be a consolidation at the top? Absolutely. Today it's about the top three in businesses taking a sizeable share of wallet . . . We'll see weaker players exit the industry.

"I think being a universal bank has lots of benefits as you can have a broader and deeper client relationship."

Deutsche Bank is a leading bank in fixed income and FX in the region. It is also the third-largest in terms of investment banking fees in Asia Pacific, and the fifth-largest in wealth management.

It is in wealth management where the cross-synergies bear fruit. "There is no better place where that (synergy) has a strong basis than in Asia Pacific. The combination of entrepreneurs and corporate balance sheets co-existing is unique. There is huge cross-leverage between wealth management and investment banking. Have banks done a good job of that cross-leverage? I don't think so. The industry can do much better - which provides the upside.''

He added: "If you exit the fixed-income business, you're not in credit finance. If you exit equities markets, you can't take the entrepreneur public . . . We think we're well positioned as a universal bank. We think this trend of consolidation is good for clients and banks.''

He believes Singapore has a bright future as it is resilient and able to reinvent itself.

Singapore growth, he said, is likely to rise from 3 per cent this year to 4 per cent next year.

This should, he said, cement its position as a leading offshore renminbi hub. Based on Swift data, the top offshore RMB centres are London, Singapore, France, Australia and the US.

"I think Singapore can become a very significant RMB centre on three fronts: As more treasury hubs of corporates are headquartered in Singapore, it could get trade finance linked to RMB. Singapore is already a large commodity trading centre. It could make sure RMB is integrated on the commodity trading side.

"And in wealth management, (the industry) could offer RMB-denominated investment opportunities."