Deutsche Bank’s Jain Courts Super-Rich in Money Manager Race
Deutsche Bank AG (DBK) co-Chief Executive Officer Anshu Jain said he and his top bankers are meeting with super-rich clients as Germany’s biggest bank fights to close the gap on the wealth units of UBS AG and Credit Suisse Group AG.
“We’re hosting a dinner tonight,” Jain told reporters in Frankfurt today. Ultra-wealthy clients “want to feel the confidence that they have access to the top management in any organization they give their personal wealth to,” he said.
Jain promoted Michele Faissola, one of his investment-banking lieutenants, last June to boost earnings from its asset and wealth management unit. With UBS managing almost four times as many assets for the wealthy, Deutsche Bank is offering cross-border deposits, hedge-fund placements and aircraft financing to lure 50 percent more clients with at least 30 million euros ($40 million) to invest by 2015.
“We have what it needs to be a true world champion and yet, let’s be honest, we cannot stand in front of you today and tell you that’s what we are,” Jain said at the briefing on the unit that invests funds for private and institutional clients. “We have not realized the potential of this division.”
UBS, Switzerland’s biggest bank, has more than $1.5 trillion under management for rich clients compared with Deutsche Bank’s 297 billion euros at the end of 2012.
The world’s top 20 wealth managers are targeting super-rich and emerging-market clients as wealth is increasingly concentrated in the most affluent families and in faster-growing economies. Ultra-wealthy households will increase assets 55 percent to $11.6 trillion by 2017, Boston Consulting Group said last month. Households with under $5 million will grow at “significantly lower rates,” the Boston-based firm said.
UBS has 45 percent of assets outside the Americas from the ultra-wealthy, while Credit Suisse Group AG, the second-biggest Swiss manager, has 42 percent.
The Zurich-based wealth managers are ranked No. 2 and No. 5 in the world by assets compared with Deutsche Bank’s placing in eighth, according to a July study by Scorpio Partnership, a London-based research company. Both UBS and Credit Suisse are targeting super-rich customers with at least 50 million Swiss francs ($54 million) to help improve pretax margins because the funds can be managed by fewer bankers compared with deposits from less affluent clients.
“We have some world class, top-notch competitors,” Jain said, adding that Deutsche Bank’s location in Germany and its financial products help differentiate the firm. “There’s no doubt we come into this with a high level of humility and respect for the fact that we are up against entrenched, very well-established competitors.”
Deutsche Bank doesn’t disclose details on the number of super-rich clients or the amount they have invested with the bank.
The bank sought to reduce costs 12 months ago by merging its asset and wealth management arms under Faissola, who built out Deutsche Bank’s commodities and rates business in his 17 years at the firm’s securities unit.
Headcount at the asset and wealth management division fell 5 percent to 11,233 at the end of March from a year earlier, according to company filings.
Deutsche Bank will fire as many as 330 people at German wealth manager Sal. Oppenheim by the end of next year, the lender said last month.
“I don’t expect any major restructuring going forward,” Faissola said yesterday, without disclosing how many jobs his unit will cut in total. “It’s now about investing in the business and making this an important pillar of the group.”
Deutsche Bank can only reach a goal of generating an after-tax return on equity of 12 percent or more by 2015 if the asset and wealth management and global transaction banking businesses double profit from 2011 levels, Jain told analysts in September in Frankfurt. The richest wealth clients bring “stable deposits,” which will help the firm meet regulatory requirements for funding, Jain said today.
Jain and Faissola said Deutsche Bank is focused on integrating its asset and wealth management businesses rather than expanding the division with acquisitions.
Deutsche Bank may review potential acquisitions once the firm has met profitability and capital targets it set for 2015 and has more clarity on banking regulation, Jain said.
Faissola said yesterday that he’s “more confident” about boosting pretax profit at his unit to about 1.7 billion euros in 2015 from 700 million euros last year. Attracting “hundreds” of super-rich clients is part of that plan, according to Dario Schiraldi, head of the unit’s global client group.
Pretax profit at the asset and wealth management unit rose 6 percent to 221 million euros in the first quarter from a year earlier, company filings show. Client assets rose 5 percent to 973 billion euros in the three months, helped by 6 billion euros of net inflows after two years of customer withdrawals.
About 45 percent of wealth-management clients are in Germany, with 14 percent in the faster-growing Asia-Pacific region, the company said.
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