Deutsche Bank: Low Profile,High Promotion

【摘要】When people try to find any sight of Deutsche Bank in China, they will find that this established European bank have quite a small number of branches in China. Differen...

When the European debt crisis is more and more serious, European countries are trapped in a worrying maze, which is influencing the global financial system.

As the U.S.-based MF Global Holdings Ltd applied for bankruptcy, the shadow which was once brought by the bankruptcy of Lehman Brothers now reappears, making people worry that that the global financial crisis might rise again sooner or later.

In that situation, many overseas financial institutions have considered China as the core goal of their business development.

“For deutsche bank, the reform in China and its development outlook have presented great business opportunities for the foreign financial institutions,”said Jens Ruebbert, chief operating officer of Deutsche Bank China. “China is the primary market of Deutsche Bank’s global strategies. We believe that we must introduce our best products into China.”

The low-key Investor

When people try to find any sight of Deutsche Bank in China, they will find that this established European bank have quite a small number of branches in China. Different from its European peers, such as HSBC and Standard Chartered, Deutsche Bank does not build a lot of branches in China.

Some experts said that Deutsche Bank looked like a professional investment bank in China instead of a traditional commercial bank. There are reviews saying that Deutsche Bank is actually an “institutional investor” in China.

However, in Ruebbert’s opinion, this is not a problem. “Deutsche Bank is an all-round bank with its own features. Our business distribution in Asia is balanceable and pertinent.”

In fact, compared with other foreign banks, Deutsche Bank seems to be a lowprofile company. Before long, Zhang Hongli, former president of Deutsche Bank Asia& Pacific, was appointed vice president of Industrial and Commercial Bank of China, a well-established Chinese local bank. Then this Germanybased bank once again received the attention from the mass media.

In spite of being a lowprofile bank, Deutsche Bank is a strong opponent for many other foreign banks. Actually, Deutsche Bank’s relation with China started in the Qing Dynasty when the nobles launched the Self-strengthening Movement. Early in 1872, Deutsche Bank set up a branch in Shanghai. Then it helped a “red-crown merchant” (the businessman that had official positions in the government) named Sheng Huaixuan to issue bonds in 1898.

However, in the next century, Deutsche Bank remained unseen till 1981 when it set up a representative office in Beijing. Strictly speaking, Deutsche Bank was a latecomer in China compared with other foreign financial institutions. From the middle of the 1990s, the U.S. financial institutions were active in China, of which Goldman Sachs and Morgan Stanley were the best.

Deutsche Bank’s business in China began to see the turning point in March 2001 – Zhang Hongli, former chief representative of Goldman Sachs in China, joined in Deutsche Bank as the director manager and president of Deutsche Bank Asia & Pacific. From then on, Deutsche Bank had got all-round breakthroughs in financial consultancy, stock and bond undertaking, bad assets handling and QFII.

At that time, some foreign banks were striving to battle with Chinese domestic banks to “seize more customers and bigger market share”, but Deutsche Bank’s name was frequently heard in helping Chinese state-owned enterprises to go public in overseas markets. It helped the Industrial and Commercial Bank of China, Agricultural Bank of China, China Life Insurance, China Shenhua Energy and Semiconductor Manufacturing International Corporation to go public in Hong Kong and other overseas markets, which made it well known to the Chinese people as an investment bank.

It is worthwhile to mention that Deutsche Bank took the lead in cooper- ating with Huaxia Bank and Harvest Asset in fund operation in 2005, earlier than its peers.

Though Deutsche Bank’s overall business in China had no outstanding performance in the next two years. But its business in corporate bank, assets management, private bank and retail bank maintained high-speed development through their own growth and strategic investment.

Offset the Deficit of Securities Dealers

The most unexpected move of Deutsche Bank was the cooperation with Shanxi Securities.

In September 2005, UBS spent 1.7 billion yuan (USD 268.2 million) controlling Beijing Securities. Then the regulating department of China closed the door for the foreign financial institutions to buy stakes of Chinese securities dealers. Three years later, the regulator required that only the Top 20 securities dealers in China were available as partners for the foreign banks. But at that time, the two years’ bull market brought local securities dealers abundant cash flow – they did not need foreign banks’ capital injection.

It is known that Deutsche Bank followed the rule of finding a partner which was “neither the best nor the worst” at that time. There were only 20 Chinese companies meeting that condition.

Actually, Deutsche Bank is waiting for the Chinese securities regulator to loosen the control. Early in June 2007, the German company targeted Shanxi Securities, which was currently hard to further expand despite its certain achievements in investment banking business. Therefore, it was eager to find a foreign company to set up a joint venture, from which it could improve both its fame and business. Then, the two companies soon reached an agreement and signed the cooperative memorandum in October, 2007.

In July 2009, Zhong-De Securities, the joint venture between Shanxi Securities and Deutsche Bank, became the first Sino-foreign joint venture securities dealer in China that was approved according to the modified rule about securities dealers.

The mass considered the cooperation between Deutsche Bank and Shanxi Securities as an important step for Deutsche Bank’s success in China. “In mainland China, the business of Deutsche Bank nearly has no difference from its global business. But it still lacked the project related with securities investment in China,” said an expert familiar with Deutsche Bank. Working with Shanxi Securities just offset the deficit.

“Presently, we are the only foreign financial institution that has legal representative banks, joint venturebased investment banks, private banks and assets management in China,” said Ruebbert.

The Way to Get the License

Though Deutsche Bank hopes to become a featured bank in China, the nature of Germans ensures that their expansion strategies in China are very pragmatic.

This is reflected by the stock structure of Zhong-De Securities. Due to the restriction of policies, Deutsche Bank only takes one third of the stake of Zhong-De Securities. In spite of that, Deutsche Bank has the right to nominate and appoint CEO, CFO and heads of key departments of the company. In Deutsche Bank’s opinion, this could make Zhong-De Securities become more international and professional.

Different from its attitude toward Zhong-De Securities, Deutsche Bank is willing to keep a flexible relationship with partners in banking and fund business. By now, it only takes two non-executive directors in the board of Huaxia Bank though it has become the third largest stakeholder. In the cooperation with Harvest Fund, Deutsche Bank acts more like a virtue controller – it takes 30% of the stake and does not send an employee.

“The management team of Harvest Fund might be more efficient than the employees sent by Deutsche Bank in managing the funds,” Ruebbert said.

This is what Deutsche Bank always follows in China, as the expert said.

In April 2011, Deutsche Bank witnessed its first branch in West China established in Chongqing. It was the fifth branch of Deutsche Bank in China. In fact, Deutsche Bank is not immune to worries under current situation.

“Though the Chinese government is gradually deleting the restrictions over the foreign financial institutions after China joined in the WTO, the pace of opening this field is slow and cautious compared with fields,” said Ruebbert. The global business of Deutsche Bank is urgent to launch all the available services in China but the restrictions force it to seek partners to expand their market share.

Ruebbert also said: “as a global financial institution, we are glad to see that domestic and international financial institutions are placed in an equal position for competition. This is good for the development of a mature market.”

Deutsche Bank is the earliest foreign financial institution that is approved to set foot in banking, securities and fund. Some reviews said that Deutsche Bank could be the champion of getting “licenses of business” because it is very familiar with the market rules in China.

But Ruebbert would rather believe that this is because Deutsche Bank’s global fame and actions meet the standard of Chinese regulating departments to issue business licenses. “The more important reason is that Frankfurt (where Deutsche Bank is headquartered) attaches great importance to the Chinese market and has been working closely with the Chinese government.”