The City of London has been facing a crisis in confidence recently with a string of stories suggesting London no longer holds its edge as a world-leading financial sector.
But despite hand-wringing in the City – particularly following ARM’s decision to list in New York – Deutsche Bank UK’s CEO Tiina Lee cautioned against this “end of the world narrative”.
“There’s been a lot of focus on listing and the attractiveness of London as a listing location but of course the financial services sector in the UK is way broader than that … Financial services in the UK had a trade surplus of £110bn according to the latest numbers I’ve seen. That’s a lot of activity … [take the FX market]: twice as many dollars are traded in London as in New York.”
In a Brexit ‘sweet spot’
Looking beyond ARM, much of the City’s declinist narrative stems from Brexit. While individual opinions on Brexit differed, the City’s institutional view was very much opposed to the decision.
However, Lee said Deutsche Bank itself is in a “sweet spot” regarding Brexit as a bank based in “the heart of Europe”. It moved “low hundreds” of staff to the EU following the vote. Now there are more fixed income traders in Frankfurt than ever before, but it still has a large operation in the UK.
In short Lee says the bank is “very well positioned to have the best of both worlds”.
From a UK perspective, Lee said she “has to see things with a glass half full approach…we think that the UK will continue to have real strengths.”
Though Brexit has arguably been damaging for the City, there are signs there might be some progress in improving relations between London and the EU following the signing of the Windsor Framework.
Windsor Framework and Edinburgh Reforms
In particular, there are hopes that the deal could stimulate progress in financial services by allowing for greater alignment between the two authorities.
Lee said she was “cautiously optimistic for more engagement on financial services” following the recent breakthrough on the Northern Ireland protocol.
The City is also holding out hope for the government’s regulatory changes, the Edinburgh reforms. The government hopes the proposals will unlock millions in extra investment to stimulate growth across the country.
Lee said the reforms were a “good first step”, but, at this stage, remain “an intention”. She noted it would be particularly interesting to see how the competitiveness mandate works for the UK’s financial regulators.
Deutsche Bank in the City of London
Deutsche Bank has been in London for a long time. It celebrated its 150 year anniversary earlier this month, and Lee is adamant that London will remain an important market for Deutsche Bank. As she notes, the UK still has the “largest wallet” in EMEA despite its wider economic problems.
Unlike some other European banks, Deutsche Bank has successfully managed a restructuring process. In 2019 Deutsche Bank launched a new strategy to streamline and focus on its core strengths, exiting equity trading and prime broking, and reducing its client perimeter.
In its most recent annual results it recorded its best profit numbers for 15 years.
Later this year, many of the bank’s London-based staff will start moving into the new headquarters, one of the largest new-build bank offices in the City.
Having completed its restructuring, the bank’s focus is now on growth. Like Deutsche Bank more broadly – which has set out its intention to be a ‘Global Hausbank’ – the UK arm is attempting to build up different parts of its franchise to reduce its dependence on investment banking and deepen its relationship with existing clients.
This means focusing on the international private bank and wealth management, areas where Lee said there’s “real opportunities in the UK to gain a market share”.
The bank hired 35 client coverage bankers to cover the 26,000 individuals with connection to the UK. Last year it appointed James Whittaker, formerly of UBS, as CEO of its wealth management business.
But Deutsche Bank is far from abandoning investment banking, particularly in the UK following a series of new hires in senior positions.
“It takes time to get a return on investment…but the increased seniority of the team will help ensure we remain market-leading in the UK. We want to be the leading European investment bank as well as a leading advisor to European corporates.”
