Anshu Jain, Deutsche Bank AG (NYSE:DB) (FRA:DBK) Co-CEO and Co-Chairman, spoke with Bloomberg Television’s Stephanie Ruhle today about the bank’s business strategy, financial regulation and industry outlook.
Jain discussed opportunities in Europe: “Europe is stable now, so two years ago, people were calling for the demise of the Eurozone. People were talking about the default of Italy. Greece is going through a very difficult time. Let’s really acknowledge what Europe has accomplished. Two institutions have been built. The OMT program is highly successful. The ECB has done a lot to create stability. We’re now going through the single supervisory mechanism process, which I think will be very good as well. You are right in saying GDP growth is still slow to come and I think that really will be the challenge over the next few years.”
He also noted: “We still see enough opportunity in emerging markets where I think it’s worth braving those considerations.”
On how much time Deutsche Bank AG (NYSE:DB) (FRA:DBK) devotes to litigation, Jain said: “It is one of the three headwinds that we have talked about. Unfortunately, it is one which will be with us for a little while longer…It’s challenging and something which we have acknowledged, especially in 2014, will remain a headwind. I think it’ll be the case in 2015 potentially as well. We’ve provided that guidance, very hard to predict, though.”
*Deutsche Bank Has `very Unique Business Model’
*European Investment Banking Landscape Is Changing
*Wants To Target Core Business In Europe
*Clients Tell Him They Want Bank’s Offering
*Deutsche Bank Has Always Grown By Bringing Talent In
*Deutsche Bank Has `terrific Brand’ Among New Hires
*Legal Issues To Be With Us For A Little While Longer
*2014 Will Continue To Be Challenging On Legal Issues
*Still Sees Opportunities In Emerging Markets
*’Europe Is Stable Now’; ECB Has Done A Lot To Create Stability
*Sees Preconditions For Consolidation After ECB Tests
Jain: Deutsche Bank’s Business Model ‘Very Unique’
STEPHANIE RUHLE, BLOOMBERG TV HOST: We’re talking about what Deutsche Bank is doing right now. It’s like a tale of two European investment banks. Barclays seems to be retrenching and getting out of businesses while you are leaning in. Why?
ANSHU JAIN, CHAIRMAN, DEUTSCHE BANK: I would like to think of this in a broader context, Stephanie. Deutsche has a very unique business model. Let’s not forget we are a global commercial bank. We’re a very strong wealth asset might. We’ve got terrific retail operations, especially in Germany but beyond Germany as well. And of course the global investment bank. So you need balance across those four businesses in 74 locations. Yes, it’s true; the European landscape for banking is changing. And Deutsche’s taking the costs.
RUHLE: But I guess my surprise is in fixed income. This is a time where you’re seeing Morgan Stanley, again, get out of those businesses, push more into wealth management. You making these hires. You just announced the hiring of Chris Yoshida. She’s a global head of your rates business. Why are you pushing into those businesses when it seems like they are struggling to make money?
Deutsche Bank’s Jain: Step back two years, we’ve got head count 17 percent. We have got balance sheets at 20 percent. Risk weighted assets over 20 percent. So the reality is we saw a lot of the issues which fixed income was facing, both structural and cyclical early. We positioned the bank well for it. And I frankly wouldn’t have picked what we’re doing right now as a pushing-in or a leaning-in. This is part of the natural cycles of the business. We have done very well in certain areas. As others, we would like to target incrementally.
RUHLE: Like where?
Deutsche Bank’s Jain: A combination of places. Our core business in Europe, don’t forget, that’s where the tectonic plate movement is really happening. Our clients are telling us that they really want a global client servicing them. So we remain committed to our core European franchise. But also here in the U.S. where we see growth as being strong, we are making a few selected targeted moves to reposition the bank.
RUHLE: Deutsche Bank is very well known for being the best in complicated businesses: derivatives, structured products, in a time where bank is streamlining due to regulation and focusing on meat-and-potato businesses. Where is your edge going to be if that is not even your expertise?
Deutsche Bank’s Jain: Again, not sure that I would agree with that characterization. Think about Deutsche Bank, you think foreign exchange. You think financing, you think repo, you think leveled debt capital markets, prime brokerage. It has been a very, very balanced strategy with clients at the core of it. And that continues to be the case. Opportunities will wax and wane. But a concept of providing comprehensive, well-linked service on a global basis, that’s what DB is about.
RUHLE: Is there a risk in bringing in external hires to run businesses? You are a culture guy. You have built Deutsche Bank to be an Anshu Jain likeness. While you bring in big time hires from the outside, how do you build your culture? Earlier the CEO of SocGen was talking about the importance of creating happy bankers. How are you going to do that?
Deutsche Bank’s Jain: Well, I’m not sure that personality cults are terrific for any institution. So Juergen Fitschen and I both work very closely together to make sure that we have the right balance of culture and values. Deutsche, let’s not forget, has always grown through bringing talent in, from a variety of sources. That was the genesis of the start, especially by an investment bank. We have done that in a variety of cases. And as long as you get the right mix of talent things work well.
Let me tell you, Stephanie, what I am most excited about, I still go on campus. I still talk to the youngsters. And Deutsche is a terrific brand globally. It’s really that blend of people who’ve been a long time, are graduates. And yes, a few selected hires of the type you have mentioned.
RUHLE: How much of your enthusiasm is tempered, because you have to devote so much time to litigation?
Deutsche Bank’s Jain: It is one of the three headwinds that we have talked about. Unfortunately, it is one which will be with us for a little while longer. And it has a lot to do with some of the instances that took place many years ago. And really our focus is to make sure that through cultural change, we ensure that beyond setting up five years from now, talking about fresh issues which have taken place, post-that very challenge…
RUHLE: How much longer do you think you’ll have to wait? How much longer do shareholders have to hold their breath getting through these litigation issues?
Deutsche Bank’s Jain: It’s challenging and something which we have acknowledged, especially in 2014, will remain a headwind. I think it’ll be the case in 2015 potentially as well. We’ve provided that guidance, very hard to predict, though.
RUHLE: For those who say your capital