Hungry Deutsche Bank looks to reclaim M&A laurels

[FRANKFURT] After years of pain that saw clients flee as its very survival appeared in doubt, Germany's Deutsche Bank hopes to reclaim a place of prestige alongside global investment banking titans in the European merger market.

Deutsche can "get back to the level of the very top players" - mostly US-based firms like Goldman Sachs or JP Morgan - only if it succeeds in clawing back market share, European mergers and acquisitions (M&A) division head Robin Rousseau told AFP.

Germany's largest lender aims to reclaim the third-place rank by fees charged for M&A it held in 2014, he added, after slipping to 10th place by 2016 in rankings published by financial data firm Dealogic.

Since 2015, Deutsche has been racked by a far-reaching restructuring launched by chief executive John Cryan.

The drive to clean up the financial and legal fallout left in other parts of the bank by its hell-for-leather attempt to compete with the world-spanning giants of the sector in the early 2000s has cost Deutsche dearly.

In late 2016, for example, it agreed to pay fines and compensation in the US worth US$7.2 billion over its role in the mortgage-backed securities crisis of 2008.

Fears the charge could be much larger sent its share price plummeting, stoking fears for financial stability around the globe.

Such headlines deterred clients as Deutsche's image suffered and questions were at times posed about whether it might need a government bailout or even go under completely.

But with many of the thorniest legal thickets now cleared, "our clients have no fears about the future of the bank" any longer, Mr Rousseau said.

In 2017 Deutsche clambered back up to seventh place in the European M&A fees charts, helped by its involvement in big deals like chemicals giant BASF's planned takeover of agrichemical activities from rival Bayer worth almost 6.0 billion euros (S$9.7 billion).

ROCKY START

It takes more than a few monster mergers to scramble back up the league tables, with Dealogic figures seen by AFP showing Deutsche achieved just 15th place in fees over the first two months of 2018.

Overall M&A activity in Europe has picked up sharply, growing 32 per cent year-on-year over the same period to reach US$267 billion.

Deutsche was involved in some high-profile buyouts in January and February, like supporting China's Orient Hontai Capital when it spent one billion euros on Imagina - the firm that controls most of the TV rights to Spanish football.

But its investment bankers consulted on just 1.0 per cent of the total value of deals, with commissions falling 41 per cent year-on-year to US$13 million.

By comparison, January-February table-topper JP Morgan billed US$112 million.

Nevertheless, analysts back Rousseau's assessment that "you can't judge based on a ranking of mergers and acquisitions over such a short period." "According to the chief executive, Deutsche has a good pipeline," said IM Warburg analyst Andreas Plaesier.

"We shouldn't focus too strongly on the first quarter" to gauge the M&A unit's health over the full year, he added.

Deutsche Bank is "very likely" to remain among two or three European banks in the global top 10 for M&A along with France's BNP Paribas, Bankhaus Lampe analyst Neil Smith said.

AFP