Deutsche Bank’s ambitious plans for expansion in the Asian equities business are closely tied to the fortunes of its highest profile hire to date: Henry Cai, the godfather of the Chinese capital market and all-round rainmaker. Euromoney was recently granted access to Cai and several other members of senior management of the bank’s equities business, including Dixit Joshi, head of equities for Asia and Robert Rankin, the outgoing head of the investment bank in Asia who is relocating to London to become global co-head of the corporate and investment bank.
Cai’s reach and influence in China are what Deutsche paid for and his ability to transform these relationships into business for the bank will be critical to its success in the region.
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| Henry Cai |
A story emerges of a business that has made big strides but which has yet to claim its place at the top table for Asian equities. Some have questioned if Cai is losing his touch, having expected his impact to be almost instant. But the real test might come when volatility in global capital markets abates somewhat.
A slide in the league tables during the ponderous start to the year in Asian ECM cannot be ignored. But it is clear that Deutsche has been making progress since it started its latest push in the region three years ago. The bank ended last year in third spot in the overall ECM table for Asia-Pacific ex Japan, behind Goldman Sachs and UBS, up from 11th position the year before. Over this year to date Deutsche is in ninth position in the overall table. Cai’s team, along with the broader equity business, will need to stage a strong second half of the year, and hope the stuttering IPO pipeline starts to flow if they are to maintain momentum.
Navigating the choppy markets amid the perfect storm of eurozone crisis, slowing Chinese growth and looming US elections are difficult for any financial institution. Volatility in the equity markets is particularly damaging for those whose strategy is closely tied to the ability to get deals away in the public stock markets.
Cai has high hopes for the Chinese business, saying that he bases his approach on not wanting to miss a single big deal in China. He also waxes lyrical over issues such as Chinese growth, the importance of hard work, why his family didn’t want him to go into the public sector and why it can be good to say no to clients once in a while.
Dixit Joshi says the bank will take a deal by deal approach and is strategically focused on quality block trade on a selective, such as the $6 billion AIG/AIA selldown in March, which has proved to be the saviour of the wider ECM business while IPOs prove near-impossible to see through to completion.
Rankin admits that the bank needs to improve. "Deutsche had a good if inconsistent equities business," he says. "In March 2009 Anshu Jain and Josef Ackermann asked what they needed to do to achieve a top-three position in investment banking in Asia Pacific. We had a credible position in equities and corporate finance. We needed to strengthen our research team and we had several senior hires. This was a very considered, front-to-back build across ECM and corporate finance. ECM is so important to Asia Pacific, accounting for approximately 70% of overall revenues. So you need to go and win in ECM in this region."
Deutsche has its senior team in place. Now is the time to execute.
To access the full story about the development of Deutsche’s equity business in Asia, read Euromoney's June feature