Deutsche to integrate in London

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The Independent Online
Germany's biggest bank, Deutsche, underlined London's status as the pre-eminent financial centre in Europe yesterday by announcing plans to bring all its investment banking together into a single business in the UK.

Deutsche Bank confirmed plans to merge all its investment banking acitivities outside Germany with its UK subsidiary, Morgan Grenfell.

Deutsche said yesterday it plans a big recruitment drive in London to build a pan- European equities business.

'The winner in this deal is neither Deutsche Bank nor Morgan Grenfell. It is London, which we know is the dominant international investment centre in Europe,' a senior Deutsche executive said.

The Lord Mayor of London, Sir Paul Newall, hailed Deutsche's move as proof that London is winning the battle against Frankfurt and Paris as Europe's centre for wholesale, global financial services.

'This decision is in line with the very rapid polarisation of financial activities in the last few months. German and French banks have been moving their investment banking activities to London, following the lead given by the Austrians and Swiss,' he said.

Deutsche recognised that the City had the management culture and governance system most conducive to investment banking. John Craven, Morgan's chairman, said the German tradition of two-tier boards and group decision- making was 'not the best way of doing investment banking'.

Deutsche has been alarmed by the amounts of corporate finance business being snapped up on the Continent by aggressive investment banks such as Goldman Sachs and has decided to make a big investment in London, and to a lesser extent New York, to meet such competition head-on.

Goldman recently snatched a plum advisory job for eastern German privatisation and the Daimler-Benz listing in New York from under Deutsche's nose.

The American banks are winning German corporate customers because they can promise a window on the London and New York markets through their integrated securities businesses.

Deutsche is now aiming for full-scale integration. It will pull together its existing equities businesses, which include Morgan's Asian and emerging markets operations, CJ Lawrence in the US and Bain in Australia.

Morgan itself withdrew from equities market-making in 1988 before selling up to Deutsche two years later.

'It was the culture and the importance of that market- place which made us buy Morgan in the first place,' the Deutsche executive said. 'This reorganisation will improve our position to win large mandates outside Germany - an area where we have a lot of room for improvement.'

Hilmar Kopper, executive spokesman for the management board of Deutsche, said: 'A truly European bank must have an integrated pan-European management operating from its largest market. That is London for international products. Our German customers will be serviced - as in the past - out of Germany.'

There would be no large-scale shift of personnel from Frankfurt to London, he said, rather a recruitment drive in the UK. However, about 300 equity and bond traders are expected to move from Frankfurt to London.

The new investment banking division will fuse Morgan Grenfell with all of Deutsche's non-German activities, and both names will continue to be used.

In addition to Morgan's 2,600 staff, some 1,000 of Deutsche's international employees will come under the new London operating roof.

Under the new plan, the investment banking division in London will be led by the Deutsche board member, Ronaldo Schmitz, backed by other board members, Rolf Breuer, Ulrich Cartellieri and John Craven. Observers speculated yesterday on whether John Craven would succeed in preserving Morgan's independence, which he won when he arranged Morgan's sale to Deutsche in 1990. The entire non-German investment banking business will now be under the patronage of Mr Schmitz.

Michael Dobson, who has been appointed chief executive of the new investment bank, said: 'We will be running our business in the new way almost immediately.'

Other international banks have been beefing up their operations in London.

Nomura switched reporting of its European activities from Tokyo to London last week, while Bank of America is planning to relocate significant operations from the Continent to London.

View from City Road, this page (Photographs omitted)

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