According to the Standard and Poors Market Intelligence Team Deutsche Bank is the 21st largest bank in the world, dropping from 17th position last year. Losing their earlier position to SocGen and Barclays who both leapfrog Deutsche Bank for Total Assets. Deutsche Bank today has a mere $1.456 Trillion compared to Europe’s largest Bank – HSBC – which holds $2,715 Trillion.
According to the Frankfurter Zeitung, back in 1914 Deutsche Bank was the Biggest Bank in the World, so the German Bank has certainly got the pedigree to be in the Top 10 if not the Top 5.
Many think that Deutsche Bank really started to show its’ strength when the Berlin Wall came down, opening up a much larger consumer market to the Bank and helping it secure its’ base. Following on from this, as soon as 1994 Deutsche Bank faced a fresh challenge when Deutsche Telekom announced that Goldman Sachs were going to support their Public Offering. This was a blow to Deutsche Bank who had aspirations to become a leading Investment Bank themselves. Buying Morgan Grenfell in the UK, Banco Madrid in Spain, and Bankers Trust in the US was then followed by Deutsche Bank’s own IPO on the NYSE in 2001, helping them establish themselves as a leading Investment Bank as well. In 2007 Deutsche held $2.6 Trillion in Assets and was back to being the largest bank in the world again (Thomson Reuters). That was before the financial Crisis…
A $7.2 bn fine with Regulators for Mortgage backed securities followed, then $2.5 bn fine related to the LIBOR scandal, and accusations of violating sanctions with Iran and Russia just for a taster.
Earlier in the pre-Financial Crisis period Deutsche Bank’s investment banking arm had a reputation in some parts for paying generous remuneration packages under the legendary mentorship of Edson Mitchell, at first and then under Anshu Jain, with an alleged $5 billion per year being paid to investment banking staff in 2006 and 2007. The US has always had an allure for Deutsche Bank and their investment in Technology is happening at the same time as continuing investment in the US market.
Today, Deutsche Bank are also Donald Trump’s biggest lender in the US, a relationship that many suggest that other Banks would prefer to steer clear of. Couple that with recent stories about Epstein where Daniel Hunter, a Deutsche Bank spokesman, recently released a statement: “Our reputation is our most precious asset. We regret the decision to associate with Epstein.”
Christina Riley, CEO of Deutsche Bank’s US business told the FT in June that “The US division would not lose out to the type of home-country bias that banks often display during a crisis, as evidenced by US banks pulling back from lending to European corporates. A perception of a Germany-versus-US divide is a “very simplistic view”.
“The US business needs to be earning more than its cost of capital,” she added.
Some might say that the US market for Deutsche Bank is like the acquisition of ABN Amro for RBS, but so far Deutsche Bank are clinging onto their US business after years of heavy investment.
Don’t think things are much better back in Germany. Deutsche Bank have had their offices raided on more than one occasion. However, there is some signs of encouragement in the domestic market. According to Stuart Lewis, Chief Risk Officer at Deutsche Bank who spoke with Frankfurter Allgemeine Sonntagszeitung recently; Deutsche Bank is also benefiting from the German government’s unprecedented aid programs. “Fortunately, almost 50% of our loan book is in Germany, which is coping better with this crisis than almost any other country. Germany has become an international role model during the crisis.”
And to top things off, there is the Berlin-based Challenger Bank, Number 26 with the charismatic Valentin Stalf at the helm. Valentin speaks to students when N26 had only 200 employees and 300,000 users during a fireside chat with Michael Koch of Deutsche Bank back in April 2017, who had been in charge of implementing Online Banking and Mobile Apps at the German banking giant. Back then Deutsche Bank boasted 500 million users per year and 10 million active customers, since then their share price has dropped from above $15 to below $10, whilst N26 continues to grow. Worth a watch just to see how much things have changed since:
In July 2019 things started to change dramatically at Deutsche Bank with Christian Sewing, CEO of Deutsche Bank leading a new strategy including:
- Investing 13 billion euros in technology by 2022, to drive efficiency and further improve products and services
- Exiting the Equities Sales & Trading business and reducing the amount of capital used by the Fixed-Income Sales & Trading business, in particular Rates
Around the same time as the new strategy was being announced, Deutsche Bank added Bernd Leukert from SAP to the Management Board as Chief Technology, Data and Innovation Officer and this is where things get a little more interesting. Bernd is a highly decorated veteran of the German tech scene and by October 2019 Leukert already started to share details of how the banks’ technology approach to building platforms will evolve. Agile teams, Engineering culture, Commitment to strategic initiatives, Simplification, and Invest in modernisation are some of the soundbytes that Leukert uses in his memo to DB staff.
This is a welcome piece of news to a Bank who had been riddled by stories of like the former CEO’s observation that a lot of employees at the bank were doing jobs that involved them, “basically being an abacus”.
Indeed, when former COO John Cryan arrived in 2015, the German bank had 45 operating systems and 100+ booking systems. One employee who was charged with streamlining the bank’s technology said Deutsche was the “most dysfunctional place” she’d ever worked
Even some of the bank’s most basic processes were recently called outdated. Some retail customers still get their balances entered into savings books by printers for which spare parts are no longer manufactured.
These days Deutsche Bank are also investing in Centres of Excellence in Romania and India, with Dilip Khandelwal joining from SAP India, reporting directly to Leukert.
In February Deutsche Bank invited bids from Microsoft, Google and Amazon to overhaul the German bank’s outdated and fragmented technology networks, people with knowledge of the matter said.
Sewing said in a speech to shareholders in May that the bank is about to “take a quantum leap in innovation” through working with cloud providers. “We will have access to the most modern IT infrastructure without having to actually own and run it.
“Together with our partners, we want to use the cloud as an accelerator for innovation, for example, by deploying more artificial intelligence and machine learning technology. We’ll be able to accomplish more and innovate more – and we’ll be cutting our costs as we do so.”
Dilip Khandelwal already received a small promotion as he takes on the role of CIO for corporate functions as well as his current role as head of the technology centres from June this year. Earlier on in June, Dilip was interviewed by India’s ETCIO where he explains his strategy towards the bank’s automation.
“Regarding Data, In Deutsche Bank, we believe in the concept of “data at rest” rather than “data at motion”.
“Consistency in modelling and access to all the firm’s data is going to be a defining factor in building a simpler technology stack for the bank. Microservices architecture we plan to achieve through our cloud focus. The applications cannot just be lifted and shifted to the cloud, they need to be re-engineered – which is what we call modernising our application landscape.
“We have embarked on a journey to move to the public cloud. In February 2020, we have started discussions with several major cloud providers to explore options for entering into a cooperation.
“Over time, we will see more and more banks moving to cloud platforms.
“Over the past few years, our teams have significantly raised enterprise-wide technology and architecture standards, which now puts us in a good position to move our cloud strategy forward. With the two in place, we are in a good shape and moving fast towards “API based banking”.
The leadership team at Deutsche Bank appear to have a good Tech strategy plan in place for the business going forward and with innovators like Bernd Leukert taking a strong hand in the future of the banking’s tech vision, there may be positive surprises in store on the tech side for a bank that has never been far from the headlines.
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Author: Andy Samu