Market Share Decline

Deutsche Replacing Investment Bank Executive

DeutscheBankLeaving-Bloomberg
Comings and goings at Deutsche Bank are likely to continue.
  • Why it matters

    Why it matters

    The departure Karl-Georg Altenburg, a former JP Morgan banker hired 20 months ago to help Deutsche Bank turn around its European investment banking business, is apparently part of the ongoing shakeup of the bank’s top management.

  • Facts

    Facts

    • Deutsche Bank’s investment banking market share in Germany fell to 12.5 percent in the third quarter from 18.1 percent in 2014.
    • JP Morgan, once seven times smaller than Deutsche Bank in European investment banking market share, is now just 0.1 percentage points behind.
    • Six current and former Deutsche Bank bankers were charged in Britain Friday with the suspected manipulating of global interest rate benchmarks.
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    Audio

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When Karl-Georg Altenburg came to Deutsche Bank just 20 months ago, he was full of ambition and many at the German bank had high hopes. He was “coming home” in a sense, after years at the U.S. rival JP Morgan, most recently as head of its German division.

Mr. Altenburg took on the role as Deutsche Bank’s co-chief of corporate finance in Europe, the Middle East and Africa.

A former management board member of the German bank, Robert Ranking, praised Mr. Altenburg for a “profound understanding of corporate finance in Germany.” A few months later, in mid-2014, Mr. Altenburg’s enthusiasm was unabated and he said he was moving forward with his plans for “an organizational realignment that will allow us to expand our market position in Germany.”

Reality has played out differently. Rather than increasing its market share, Deutsche Bank has lost ground to competitors under Mr. Altenburg’s leadership, despite their home court advantage. Now, Mr. Altenburg has become the latest high-profile executive to leave Germany’s largest bank, according to financial sources. The news was first reported by the German business monthly Manager Magazin.

The former mechanical engineer appears to have fallen victim to the major reorganization plans of new Deutsche Bank co-chief executive John Cryan.

Deutsche Bank has lost market share for deal consulting and capital market financing in Germany.

Mr. Cryan’s overhaul includes splitting investment banking into two divisions – one for corporate and investment banking and one for trading. Jeff Urwin will head the new corporate and investment banking division. He also came from JP Morgan, but is naming fellow Brit Alasdair Warren, formerly with Goldman Sachs, as new European head of the division.

That leaves no room for Mr. Altenburg, or his co-chief, Miles Millard, who is retiring. Neither Mr. Altenburg nor Deutsche Bank were willing to comment.

With Mr. Altenburg leaving, Deutsche Bank loses another manager with excellent German contacts in the financial world. The well-networked Stephan Leithner is leaving the bank for investment company EQT, while co-chief executive Jürgen Fitschen, known as “Mr. Germany” for his contacts with bankers across the country, is to step down next spring.

According to Deutsche Bank, the staffing shake-ups are likely to continue, including in asset management, a promising division where the former BlackRock manager, Quinn Price, will take the helm in January.

 

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Karl-Georg Altenburg, pictured here in a Handelsblatt interview, was once a rising star in Deutsche Bank. Source: Andreas Reeg for Handelsblatt

 

The bloodletting in the investment bank, where many European banks have announced deep cutbacks in recent months, isn’t likely to end. Both insiders and recruiters fear that as soon as bonuses are paid out in March – likely sharply reduced compared to previous years – some investment bankers will look for new opportunities.

They may go to instead to U.S. investment banks, which have recovered since the financial crisis and are showing signs of making inroads into Deutsche Bank’s home turf in Europe. Both JP Morgan and Goldman Sachs see potential in Europe, and have already begun to steal market share.

Insiders say that Mr. Altenburg was a key player in several initial public offerings that Deutsche Bank ran for German companies, including one for the automotive industry supplier Schaeffler. But overall, Deutsche Bank has lost market share for deal consulting and capital market financing in Germany since he took the helm.

The bank’s market share fell from 18.1 percent in the second quarter of 2014, when Mr. Altenburg started his new job, to 12.5 percent in the third quarter of 2015, according to financial services company Dealogic.

The worst part for Mr. Altenburg is that while he was at Deutsche Bank, his former employer JP Morgan has only grown its market share in Germany. His German replacement at that company, Dorothee Blessing, is riding a wave of successes. The difference between the two companies’ market shares is only 0.1 percentage points. When Mr. Altenburg left JP Morgan for Deutsche Bank in February 2014, the German bank had seven times the U.S. company’s market share in Germany.

These are difficult times for Deutsche Bank, as they are for the entire German and European banking sectors, which are struggling with low profits and high costs compared to U.S. rivals that overhauled their business models much sooner after the 2008 financial crisis.

Added to Deutsche Bank’s woes are its ongoing legal troubles. On Friday, Britain’s Serious Fraud Office charged six traders in London with suspected fraud in connection with manipulating global interest rate benchmarks. It could not be determined if all of the people charged were still with the bank.

The office, an independent financial crimes unit of the British government, said it was charging Christian Bittar, Achim Kraemer, Andreas Hauschild, Jörg Vogt, Ardalan Gharagozlou and Kai-Uwe Kappauf as part of a probe into bankers suspected of manipulating the Libor and Euribor interest rate benchmarks.

The global investigation led by U.S. and U.K. prosecutors in the Libor and Euribor scandals has netted about $9 billion in fines from most of the world’s largest financial institutions. Deutsche Bank was fined $2.5 billion by investigators, the most of any bank in the scandal. Investigators criticized Germany’s largest bank for trying to impede the probe.

 

118 Deutsche Bank-01 WTB 2014

 

Daniel Schäfer is Handelsblatt’s finance chief and Robert Landgraf is the section’s deputy editor. Laura de la Motte is Handelsblatt’s lead correspondent on Deutsche Bank. To contact the authors: d.schaefer@handelsblatt.comlandgraf@handelsblatt.com and delamotte@handelsblatt.com    

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