24th February 2024

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Business Industry and Financial

Deutsche Bank plans to beef up investment bank advisory team

Deutsche Bank is planning a hiring spree and significant expansion of its investment bank advisory team, as the German lender positions itself for a dealmaking rebound and to take advantage of market dislocation after the collapse of rival Credit Suisse.

Deutsche has already recruited 26 managing directors in the past two months — with several coming from its Swiss peer — and plans to continue adding more, investment bank boss Fabrizio Campelli said in an interview.

The hires are on top of Deutsche’s move to buy UK stockbroker Numis for £410mn, announced on Friday. When completed, the acquisition will add 344 trading, research and capital markets staff to its London corporate-broking unit.

“We are investing in advisory, which is a high-returning business. Being in M&A and ECM is key,” Campelli said. “The UK is a natural market to focus on” because it has 25 per cent of the European corporate finance fee pool.

Combined, it marks one of Deutsche’s biggest expansions in investment banking since the financial crisis. It is also the most tangible evidence of its renewed ambition since the 2019 decision to exit equities trading and shrink the underperforming unit, which saw thousands of jobs cut and billions of euros of assets run down.

The expansion in front-office staff happens at the same time as a renewed push by Deutsche to cut jobs in its back-office functions. It announced this week that it would this year axe 800 senior positions in its infrastructure units that were not client facing, and plans additional reductions over the coming two years as it wants to get rid of €2.5bn in costs.

In the five years since Christian Sewing was appointed chief executive, staff numbers had fallen by 11 per cent to 86,000, compared with the 2019 goal of 74,000. Deutsche previously said that it missed that target as it replaced contractors with its own staff and had to build up the headcount in control functions to fix shortcomings in anti-money laundering and transaction monitoring.

Sewing has long talked of switching back into an offensive mode, but the hiring spree and the Numis acquisition are the starkest examples.

While some analysts criticised the Numis deal because the “strategic rationale is not clear” and “it is not aligned with what shareholders want”, Campelli argued that the expansion was carefully targeted and complementary to its strategy to emphasise corporate banking and wealth management.

“This is not us going back into equities,” he added, and the bank has pledged that it will not result in a material increase in resources to the division.

Deutsche’s expansion comes at a time when other global investment banks have been heavily cutting back on staff after a sustained dealmaking drought.

“We are at a multiyear cyclical deal-flow low point right now, and with the market poised to rebound in [20]24, 25 and 26, this has created a great opportunity for us to invest in and attract talent,” said Mark Fedorcik, co-head of investment banking.

With the senior hires and Numis deal, Fedorcik said Deutsche was aiming to increase its global market share in M&A advisory back to its 2014 level of 4.5 per cent from the less than 2 per cent it has fallen to since. Deutsche at present sits outside the top-10 in M&A.

Among those joining from Credit Suisse are William Mansfield, the former head of M&A for Emea at the Swiss bank, who will be vice-chair of origination and advisory in Deutsche’s London office. Another recruit is Nick Thursby, who will become head of the financial institutions group in south-east Asia.

Building up the advisory side of the investment bank is also designed to reduce Deutsche’s heavy reliance on fixed-income sales and trading, which requires more capital to operate and carries considerably more risk of losses.

In the first quarter of the year, trading contributed €2.4bn of revenue compared with €327mn from capital markets and advisory. That is equivalent to just 12 per cent of the total for investment banking.