Deutsche to expand US and London operations: Morgan Grenfell to be integrated further - Big move into equities market planned

Click to follow
The Independent Online
DEUTSCHE BANK is to announce plans next month to expand its investment banking operations in London and New York, spearheaded by a big move into the equities market and greater investment in areas such as corporate finance.

The bank is also expected to integrate Morgan Grenfell, its London merchant bank, more closely into its investment banking business.

Morgan has enjoyed considerable independence since it was taken over five years ago. But the changes are not expected to lead to the loss of the name or the separate identity of the merchant bank, which is likely to co-exist with a strengthened Deutsche operation in London.

The Deutsche plans are a response to growing global competition in the securities industry from British and particularly American firms, which have been threatening the Germans on their home turf.

A decision to build up the London operations will be seen as an important boost to the City as an international financial centre, though Deutsche sources rejected suggestions this was to be done at the expense of Frankfurt, Germany's pre-eminent financial centre.

'Frankfurt will remain the hub of Deutsche's global operations, the mega-centre, along with two other centres, London especially, and New York,' said a senior Deutsche Bank executive.

German customers are finding it increasingly attractive to raise funds through firms that have access to international institutional investors in the London and New York securities markets. This leaves traditional bank lenders in Germany exposed.

'If we want to be a global operator, then we must be able to attract the international institutional investors, and that means the businesses in London and New York need to attain a critical mass,' said a Deutsche banker. 'The strategy will aim to strengthen operational activities throughout the comprehensive range of investment banking products.'

The new strategy foresees a radical restructuring of Deutsche Bank's operations, including the shifting of some resources from Frankfurt to London, as well as building up trading in New York.

Deutsche confirmed that all its investment banking and trading activities have been under scrutiny for some months. The official line yesterday was: 'No decision has been taken yet, and will not be made at next week's board meeting.' But sources confirmed the review was almost complete and an announcement was expected soon. There are weekly board meetings.

Deutsche indicated the new strategy was to invest heavily in building up its own equity and corporate finance operations rather than to attempt to buy an existing big player.

Ronaldo Schmitz, a board member of Deutsche Bank, said this month that the bank had given up earlier ideas of buying a big New York equities house. 'My worry is it would take a generation to integrate such a big institution into Deutsche Bank,' he said.

Such concerns appear to apply to London as well, where the strategy is also focused on expanding Deutsche's existing operations. Deutsche's London business in its own name employs about 800 people, with 1,500 at Morgan Grenfell.

Morgan Grenfell has been fighting to keep as much independence as possible. Sources there said discussions centred on how the merchant bank could assist Deutsche in building up equities business, but in Frankfurt it was thought the task might not go to Morgan.

Deutsche has already set up a gilt-edged market-maker under its own banner in London, though this remains small - unlike the German bank's big Treasury operations in the UK.

View from City Road, page 15