Last week, Germany's biggest bank announced a shake-up to its structure, creating a new international private bank and naming its head. What is the basic strategy and how does Deutsche intend to put a dent in the universe with the change? This publication finds out.

Deutsche Bank’s new international private bank is bringing teams together to build the scale needed to gain an edge in today’s market, the lender has said.

As reported here last week, the Frankfurt-listed group has pulled business lines together to build an entity serving a total of 3.4 million customers. The IPB is part of the wider private bank, which includes the German retail arm. Claudio de Sanctis, most recently global head of wealth management, heads up the new entity and is chief executive for Europe, Middle East and Africa. As part of the change, Ashok Aram, who was the head of private and commercial business international and CEO EMEA, left the firm for personal reasons. (De Sanctis has been in his most recent role since November last year.)

“If you don’t have the right scale then it is hard to compete,” de Sanctis told this news service in a call after last week’s announcement. “Scale is essential.”

“In Europe we had the largest scale in the industry but chose to split it into different businesses, which was not as productive as it could have been. True, the old divisions did have a reason for existing. We are now the largest single European wealth management and private banking franchise.”

Restructuring provokes comment – and Deutsche Bank has been on a bumpy ride in recent years. As the largest bank in the eurozone, it has been buffeted by the strains on the system after the 2008-2009 crisis. There is a clear wealth shift strategy now under way. It is cutting investment banking risk exposure and adding 300 client-facing wealth management professionals out to 2021; it has made a raft of hires even while the overall banking group is cutting payroll and working to increase margins. The bank is also targeting family offices, something of a trend among big banks. In January, it appointed one of its senior figures, Roberto Rosati, as managing director responsible for driving its single family offices business.

No stranger to movement himself, De Sanctis has had a number of roles in the industry. He was previously head of wealth management in Europe, which serves clients in around 30 countries including Deutsche Bank’s home market of Germany. He was also chief country officer of Switzerland, a role he will retain, the firm said in a statement today. De Sanctis joined the firm in December 2018 from Credit Suisse, where he spent five years, initially as market area head for Southeast Asia private banking, Asia-Pacific, and most recently as head of private banking, Europe. Prior to Credit Suisse, he spent seven years at UBS Wealth Management Europe. Earlier in his career he worked at the private banking arm of Barclays.

Lending
De Sanctis argues that the bank can set itself apart as a lender, particularly in handling complex issues for entrepreneurs of small- and medium-sized businesses that are a prized client group. 

“The sweet spot [clients] are active entrepreneurs in small and medium enterprises. We need to lend them [SME entrepreneurs] money. Lending is a key component of servicing that kind of client,” he said. 

A problem for some entrepreneurs is a lack of a credit history [in their business], challenging some wealth managers who lack the resources to probe what businessmen and women need, he said. 

“I believe the credit capability of Deutsche Bank is an incredible differentiator,” he said. “This bank has been lending for the past 150 years and it is very ingrained in this institution.”

Banks that were called upon to lend earlier this year when the pandemic struck in March-April were found out, he said. “Some firms closed down clients aggressively,” de Sanctis said. “This is taking the path of least resistance.”

De Sanctis said that there is likely to be some consolidation of people, offices and booking centres in line with the strategy in the months to come. “I am not looking at a revolution but looking at things strategically.”

“India is one area I am very interested in…..we are already there….it is a huge country with great potential growth. There is a clear-cut investment case,” he said. 

Hiring continues apace. “We do pick up some emerging talent from the lending side…we keep adding bankers every single month. We are having extraordinary success in hiring talent,” he said, referring to recruits such as Marco Pagliara from Goldman Sachs, Alessandro Caironi from Credit Suisse, Sofia Sool from UBS, Davide Lombardo from JPMorgan, and relationship management teams from JPMorgan in Switzerland and Credit Suisse in Italy. 

Building a successful private banking space is a long game - or it should be. But the more that Deutsche – like other banks – adds to the profile of wealth management, the more important its results will be. Along with its peers, provision for the impact of COVID-19 has weighed on wealth management results, and a softer stock market will dent AuM. Over the medium term, the bank will hope that the kind of value-add that de Sanctis talks about wins through.