Changes in the monolith
The world's largest bank with more than $800 billion in assets, Deutsche Bank has seen a surprising number of changes and turmoil for such a venerable institution. While the bank offers a wide variety of financial services, such as commercial banking, credit cards, and asset management, the bank has spent a great deal of energy in recent years attempting to grow its investment banking business.
In the mid-1990s, the firm, which at the time operated its I-banking under the name Deutsche Morgan Grenfell (the bank had acquired English I-banking firm Morgan Grenfell in 1989), paid exorbitant salaries to poach bankers from rivals. In its brief existence, London-based DMG quickly achieved high rankings in industry publications such as Risk and Institutional Investor. However, in 1997 and 1998, the firm's fortunes fell. American and German bankers clashed over the parent Deutsche Bank's commitment to U.S. investment banking (funding the U.S. operations) and the lavish expenses accrued by partying U.S. bankers (funding the U.S. operations). In early 1998, Deutsche Bank decided to fold DMG back into its universal banking operations, and lost some of DMG's key talent (including bankers it had lured away from rivals a couple of years earlier). To rebound, Deutsche began sniffing around U.S. banks for acquisitions it believed could enhance its position. The bank was rumored to be courting J.P. Morgan, Hambrecht & Quist, and PaineWebber.
Taking over the trust
Those deals, however, were not to be. Deutsche Bank announced at the end of November 1998 that it would acquire Bankers Trust, thereby creating a financial services behemoth with assets of well over $800 billion -- the largest banking institution in the world. The acquisition, which closed in June 1999 for about $9 billion, was the largest acquisition of a U.S. financial group by a European bank, uniting Germany's largest bank with the United States' eighth-largest. The combined bank is among the world's leaders in asset management and global custody.
Anyone who's kept an eye on the post-merger turmoil at Citigroup knows that large-scale deals can mean large-scale problems within the organization. Deutsche Bank has attempted to circumvent these potential problems by moving quickly to assimilate Bankers Trust as the acquisition closed in June 1999. In May 1999, the bank named John Ross president and CEO of its American operations. Deutsche is once again predicting big things for itself in the American market; chairman Rolf E. Breuer has said he expects one-third of the bank's profits to come from the U.S. three to five years from now.
While it was working through the complex merger with Bankers Trust, Deutsche was also dealing with another sticky issue: its ties to Nazi Germany. In February 1999, the firm disclosed that loans from the bank helped finance the construction of the concentration camp at Auschwitz. This revelation hit as the bank, along with competitor Dresdner, was already facing lawsuits accusing them of profiting from gold and other assets taken from concentration camp victims. The firm has agreed to participate in a compensation fund organized by the German government that, when agreed upon, is expected to exceed the $1.25 billion settlement created by leading Swiss banks in January 1999. Deutsche will participate in the fund along with other major German companies, such as Volkswagen, DaimlerChrysler, and Siemens, which all used concentration camp inmates for labor.
Deutsche is currently being investigated for allegedly assisting with the tax evasion of many of the company's wealthy customers who have confessed to the crime. Several hundred customers and about 100 employees provided information on anonymous transfers that tax investigators believe were made in order to aid clients evade taxes. Furthermore, they think that Deutsche board members and employees were aware of such transactions and permitted them to continue. Not surprisingly, the company denies any such association and has labelled the investigation to be "not a cause of great concern."
A firm "no" to German unification
In March 2000, Deutshce Bank announced plans to merge with Dresdner Bank AG, the third-largest German bank. The deal, estimated at $31.6 billion dollars, would have created the world's second-largest bank at $1.2 trillion in assets, behind the proposed merger of 3 Japanese banks, Industrial Bank of Japan, Fuji Bank and Dai-Ichi Kangyo Bank. The merger was the second time the banks planned a union: they held talks centered around combining their retail operations in 1999, but the talks went nowhere. The full merger rapidly fell apart amid a dispute over the future of Dresdner's investment banking division, Dresdner Kleinwort Benson (DKB). According to published reports, Deutsche wanted DKB closed or sold, a move opposed by Dresdner chairman Bernhard Walker, who was slated to become co-CEO at the combined firm. In April 2000, with the dispute over DKB's future raging on, the deal was called off by Dresdner. Deutsche CEO Breuer told The Wall Street Journal that "no solution acceptable to both sides could be found" and that Deutsche had no other mergers in the pipeline.
When hiring new employees, Deutsche Bank looks for candidates who demonstrate strong leadership, communication, and "problem solving" skills. Given Deutsche's international focus, applicants who speak a foreign language have an edge, although this proficiency is not required. For its associate positions, Deutsche prefers previous work experience in finance. New hires should expect to go through an extensive orientation and training program, covering topics such as corporate tax, accounting, valuation, and financial modeling. Deutsche Bank?s target business schools in the U.S. are Wharton, MIT, Stanford, Chicago, Kellogg, Tuck, Harvard, NYU and Columbia. New MBA hires in Global Markets undergo a 12-month rotation program.
AAA and staying that way
Insiders say working for Deutsche entails a lot of hard work, and some cultural uncertainty. The firm, for example, wants you to know that "MBAs joining the Investment Banking Division of Deutsche can be expected to be pretty well thrown in at the deep end on arrival. That is not because we want to see whether they can sink or swim. After completing the MBA from a good school, we already know the answer to that. The reason is that the MBAs we recruit tend to be people who pick things up quickly and apply themselves to the task with little supervision." As might be expected at a European bank, Deutsche's global culture "revolves around conservatism. The Directors (the Vorstand, the Germany-based committee) will do whatever is necessary to maintain the bank's AAA rating," say insiders. A former employee says: "In my opinion, the bank is highly bureaucratic and has many inefficiencies that hamper deal execution. The problem stems from cultural differences between the U.S. branch and overseas management, compounded by a strong German-based controlling presence."
Many mini groups
So what is the culture like at Deutsche? The short answer: prognosis inconsistent. "The first thing you're asked when you arrive is 'Where are you from?' That is, at which bank did you formerly work?" says one investment banker. Insiders tell Vault Reports that "at present, no one seems to know what the corporate culture is. There are many mini-cultures. Much depends on the firm from which the managing director of a particular group was recruited." Another employee agrees: "There are little groups and subgroups - a Goldman group, a Lehman group, etc." Insiders say the firm does seem to host alumni from the best firms on Wall Street. One associate reports that "if you go around the table in New York and ask people where they?re from, you'll hear Merrill, Goldman, Lehman, Salomon, Morgan Stanley, J.P. Morgan - all the other top banks."
Making it in New York?
Deutsche's reputation gained strength with the early strong performance of Deutsche Morgan Grenfell, but industry insiders say the firm's name still doesn't carry the aura of its Wall Street rivals. A Deutsche associate informs us that "Deutsche's reputation varies widely from region to region and among business areas." One employee expounds on Deutsche"s reputation. "Across the different business areas, Deutsche's rep is heavily slanted toward the fixed-income and FX [foreign exchange] business. We are not yet a top player in the equities markets or core investment banking areas." Another employee breaks down Deutsche's reputation by region: "In Europe, Deutsche Bank is one of the top names, and certainly one of the main players in the London markets. Only the big Swiss-owned firms (Warburg Dillon Read and Credit Suisse First Boston) and a few of the top U.S. names (Merrill, Goldman, and Salomon Smith Barney) have the same presence and prestige in Europe. In Asia, same story, different competitors - here main rivals include J.P. Morgan. The above names are also strong here - except for Salomon, who are nobody in Asia." What's missing from the analysis? "New York is the only major market where I'd say we're not in the same league as the top names," says a Deutsche vice president.
ABN Amro;Citibank/Citigroup;Credit Suisse First Boston;Dresdner Bank;Warburg Dillon Read
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