Deutsche Bank boosts Asia bets as clients seek Wall St alternative -CEO

Christian Sewing, CEO of Deutsche Bank, poses after an interview with Reuters in Hong Kong, China Sept 8, 2023. REUTERS/Selena Li/File photo

HONG KONG  – Deutsche Bank is investing more in Asia Pacific markets to woo clients seeking European lenders amid Sino-U.S. tensions and to profit from the region’s higher economic growth compared to other major markets, its chief said.

“From a capital allocation, technology allocation and a people allocation perspective, there is a direction of more resources to Asia Pacific,” Christian Sewing, CEO of Germany’s largest bank, told Reuters in an interview in Hong Kong on Wednesday.

Asia offers higher profit margins than other regions, according to Sewing, who took the helm at the lender in 2018. It operates in 15 markets in Asia Pacific and generates about 15 percent of its global revenue in the region, he said.

The bank has hired about 60 managing directors for the origination and advisory business of its global investment bank so far this year, with one-third of them in Asia and mostly based in Hong Kong and mainland China.

Sewing said that the demand for advice from clients in Asia Pacific was far higher than two or three years ago.

Because of geopolitical uncertainties and companies’ willingness to diversify their banking relationships, Sewing said clients want to work with at least one European bank.

Deutsche Bank’s Wall Street peers increasingly find themselves between a rock and a hard place as Sino-U.S. tensions continue to simmer and U.S.-China decoupling scenarios weigh on the confidence of corporates having exposure to both.

“In each and every client meeting I hear the sentence – they want to have an alternative to the U.S. banks,” he said. “And that’s the spot which we are targeting and which we are competing for.”

Commenting on the slowing Chinese economy and its impact on the bank’s business, Sewing said a 5- percent annual growth target for the world’s second-largest economy was still higher than what many other countries are aiming for.

“In the next couple of years, despite geopolitical tensions and economic slowness in some markets, Asia Pacific will grow faster than the world average,” said Sewing.

Next phase of growth

Deutsche’ ambitions in Asia Pacific follow a drastic cut back in its business in 2019 as the bank had to restructure globally after grappling with sustained losses.

At that time, it announced plans to cut around 18,000 staff worldwide, with teams disbanded and jobs cut in most of its Asia Pacific markets.

“We are now going into the next phase, which is clearly growth with disciplined cost management and a clean balance sheet, while maintaining a healthy and robust capital ratio,” Sewing said.

For the past 1-1/2 years the bank has been investing in some “capital-light businesses”, said Sewing, who led the lender to its 13th consecutive profitable quarter in the third quarter of 2023, a notable streak after years of losses.

As part of its Asia investment plans, in May the German lender said it doubled capital in its Ho Chi Minh City branch to more than $200 million and boosted the capital commitment to its Seoul branch by 36 percent to $159 million in September.

Sewing contended that recent job cuts the bank has announced were part of its strategy to improve efficiency, such as going digital in certain private banking functions, while new hires are being made to strengthen client activities.

Deutsche Bank has grabbed market share and gotten “good access” to people as a result of Credit Suisse’s collapse and rescue by UBS in March, Sewing said.