The world’s best bank for corporates: Deutsche Bank

As chief executive of Deutsche Bank, Christian Sewing has put corporate client relationships at the heart of his strategy. He likes to refer to it as the Hausbank approach.

Five years ago, this strategy saw Sewing carve out a new corporate bank. This included a treasury coverage team offering cash management, trade finance, foreign exchange and lending – and working alongside the investment bank.

The corporate bank has brought advantages in terms of technological integration. And it has arguably made the firm truer to its roots in Germany – the world’s third biggest exporting nation – and to its place at heart of world’s largest trading block, the European Union. Above all, the shift has underlined Sewing’s desire to grow more stable revenue streams such as transaction banking.

Despite a difficult economic environment, especially in Germany, the approach has played to Deutsche’s strengths and helped it build on its underlying advantages. Last year, the corporate bank was by far the most profitable part of the group. Its post-tax return on average tangible shareholders’ equity was 16.6%.

A 50% increase in net revenues at the corporate bank since 2021 is not just the effect of higher rates on its balance sheet in Germany. Those inside the corporate bank say it is generating new business, including fee income, by winning new clients and mandates, and by expanding its product capabilities in Europe and elsewhere.

Banking German individuals and small businesses is notoriously unprofitable, due to the retail dominance of public-sector and cooperative banks. Yet staff at Deutsche believe it is good to have Germany as a home market in corporate banking. German mid-caps, which are often family-owned and notoriously conservative in terms of their balance sheet management, sometimes have little need for financing. Yet their export orientation often means they require fee-generative services like trade finance, international cash management and foreign exchange.

The corporate bank has helped Deutsche cover these so-called Mittelstand clients with more focus than when many of those clients were housed in its retail division. Thanks to the corporate bank structure, a typical Mittelstand can now access a level of service that was previously restricted to large-cap clients.

And while it has bolstered its service, Deutsche has also become more consistent in making sure that each of its clients is sufficiently profitable. That has involved developing analytical tools to measure profitability across products and booking centres, factoring in the related deployment of risk-weighted assets.

Deutsche’s better health today in terms of its financial results, share price and credit rating has given corporate clients the confidence to award it multi-year mandates in treasury services. But according to global head of corporate bank David Lynne, the development of new revenue streams also relates to a focus on helping corporate clients deal with changing trade patterns, digitalization and climate transition.

“There’s been a significant growth in our franchise wins that relate to those topics, allowing us to widen and deepen our client base globally,” Lynne says. “Not only have rates gone up but our liability base has also grown strongly over the past two to three years from clients in these areas.”

The bank has seen the benefit of investing in technology, notably in its Merchant Solutions platform – targeting companies transitioning to online channels, as well as new businesses such as social media and online marketplaces. Last summer, for example, it won a mandate to become the issuing partner for Lufthansa’s Miles and More credit card portfolio in Germany.

Investments in financing and advising companies around energy transition has also helped. Deutsche was recently underwriter, lender and hedging bank in the €4.4 billion euro project financing for three European factories developed by Automotive Cells Company, following similar financings for Northvolt and H2 Green Steel.

Lynne is based in Singapore and previously served as the corporate bank’s Asia-Pacific head. He knows that, although most of the corporate bank’s revenues are related to Germany, the bank’s value for clients is dependent on its sophistication and globality. Its operations in many Asian countries are much fuller than those of its peers, particularly in its home market.

“Our global network and product suite really helps us optimize how cash flows through our clients’ businesses in different parts of the world,” agrees Jan-Philipp Gillmann, head of the corporate bank for Europe and global head of coverage.

Today, Deutsche’s global network is more important than ever as corporate clients have had to adjust to the supply chain disruptions of the pandemic and to deal with new geopolitical realities. This is largely why, over the past two years, it has established a presence in Bangladesh and opened offshore banking in the new Indian financial centre, GIFT City.

“You’re seeing the world move to three supply chains: one for Europe from west to eastern Europe and somewhat into the Middle East, one for Asia Pacific, and one for the Americas,” says Lynne. “That fits clearly to where we have local presences in areas like cash management, trade finance and financing.”