DEUTSCHE Bank has effectively turned its back on Scotland following a decision by new chief executive Josef Ackermann to sell WM Company and the company’s global custody businesses.
The Edinburgh-based units, which specialise in custody, investment administration and performance measurement, employ more than 900 people at Crewe Toll, Edinburgh. They came into Deutsche Bank‘s fold through its 1999 acquisition of US-based Bankers Trust.
But the businesses are now being “aggressively marketed” by Deutsche Bank, according to industry sources, and are already being pored over by potential buyer. These include Mellon Financial Services, State Street, Northern Trust, JP Morgan Chase, HSBC, Bank of New York and BNP Paribas.
One industry source said: “The Edinburgh-based businesses need heavy investment in IT if they are to remain competitive. But Deutsche has not been prepared to commit the funds. There has also been a lack of stability and leadership.”
Germany’s largest bank made an unexpectedly strong commitment to Scotland in February 2000, and has recently been running a poster campaign vaunting its Scottish credentials. But the change of tack does not come as a total surprise to Edinburgh staff.
One WM Company insider said: “We know there is a review but we are keeping our heads down and focusing on delivering services to our clients and getting on with the job.”
Even so, there has recently been an exodus of clients and staff from WM and Deutsche Bank’s investment operations businesses. Lloyds Bank transferred £30 billion of Scottish Widows business to State Street last year. Current major Deutsche/WM Company clients include Schroders and Prudential.
Deutsche Bank’s decision to sell is surprising given that, in 2000, it invested some £30 million in a new BDG-designed office building at Crewe Toll. This was officially opened last November by Henry McLeish, on the day he resigned as first minister.
Ackermann, the first non-German to head Deutsche Bank, took over as chief executive from Rolf Breuer at a shareholder meeting in Frankfurt last week.
Deutsche Bank refocusing
The Swiss-born investment banker has pledged to slash costs by €2bn (£1.26bn) over the next two years. He has made no secret of his desire to offload “non-core” business – which insiders say include global securities services and passive fund management – and swiftly attack Deutsche’s bloated cost base in Germany.
The 54-year-old is also attempting to sell Deutsche’s passive or index-tracking fund management business in the US, which industry sources say is to be snapped up by State Street.
Ackermann’s vision is to refocus Deutsche Bank on areas including investment banking, corporate finance and active asset management, where he believes it can compete with bulge-bracket firms Credit Suisse, JP Morgan Chase, Merrill Lynch and Goldman Sachs.
Analysts said Ackermann may also wish to add a fourth leg to the reinvented Deutsche Bank— Swiss-style private-banking for wealthy clients around the world.
But restructuring Deutsche’s German operations is likely to be Ackermann’s toughest challenge, as it will require circumventing Germany’s rigid labour laws and require a cultural revolution that replaces consensus management with profit-driven dynamism.
He will also offload €14.9bn (£9.42bn) of industrial holdings — in companies including DaimlerChrysler, Munich Re and Allianz —and shake up domestic lending, a significant proportion of which is made to slow-growth “Mittelstand” companies.
Last December, Deutsche Bank sold its Edinburgh-based energy and life sciences consultancy Wood Mackenzie to a management buy-out funded by the Bank of Scotland.
Once the current sale is completed, all Deutsche Bank will have left in Edinburgh is a small equities operation employing 30-35 people.
This breaking news story was published in the Sunday Herald on 26 May 2002