Best Global INVESTMENT bank Deutsche’s momentum drives it to the TOP Deutsche Bank has grown from being a top-three global markets trader into a top-three global corporate finance house as well: a powerful combination whose architect, Anshu Jain, now hands over to two successors to guide through its most testing period. Deutsche is the master of markets so broken and illiquid that high share is almost a curse, not a blessing. But if better times lie ahead, it will reap rich rewards By: Peter Lee

ome September, Anshu Jain, top three in the world as a sales and trading were good years for the industry with rallying co-chairman of the group ex- intermediary across the currency, bond, markets and regulatory changes yet to take ecutive committee and man- credit, equity and commodity markets. More effect. But that was a false dawn.” agement board of Deutsche recently it has established itself also as a top- The good news for Deutsche Bank is that it Bank, will be presenting on three firm in the corporate finance disciplines took key decisions in the first quarter of 2009 Cthe bank’s strategy 100 days into his tenure of investment banking: debt and equity to radically reshape its investment banking alongside Jürgen Fitschen, as co-head of the capital raising and M&A. business. eurozone’s regional champion bank. Look back four years to the first quarter Jain recalls: “We shut down prop trading He will face plenty of questions on the of 2008 at the start of the financial crisis. completely, scaled back on exotic derivatives bank’s plans to build its fully loaded Basle Deutsche had a 4.3% share of the global and securitizations. We shuttered businesses III core equity tier 1 ratio: how far can it investment banking fee pool, according to that together accounted for one-third of our raise equity organically now that plans to Dealogic. The combined shares for Bank of revenues but it was fundamentally necessary. sell its global alternative asset management America and Merrill Lynch were 9.1%. JP- Then in 2010, with project Integra, we drove division appear to have foundered? Can it Morgan, then the top-ranked firm, enjoyed much closer connectivity of the wholesale sell or mitigate more risk-weighted assets a 7.5% market share. Goldman Sachs had businesses, for example with combined cover- without hurting the bank’s earnings and 6.4%. age for the global transaction bank and the profits, and what return on tangible com- At the end of the first quarter of 2012, investment bank.” mon equity can the bank generate if market Deutsche Bank had lifted its share far more It is not the only bank to have responded and regulatory demands on banks continue than any of those firms, to 5.6%. It still lags to the new normal by reducing proprietary to require higher ratios? behind JPMorgan, which has increased share risk and breaking down the old silos but What new plans does the bank have for more marginally to 7.9%. The combined it has executed particularly well. When its retail banking businesses in Germany and Bank of America Merrill Lynch now comes Deutsche Bank formed a joined-up corporate abroad? Which will it grow and which sell? in at 6.2%. Deutsche has pulled above Gold- and investment bank in 2010, it set itself the And how will it fix the asset management and man Sachs, whose share has fallen to 5.3%, target of generating €500 million of synergies wealth management businesses? and also above Morgan Stanley. So although within a year. This was a formidable task yet If the present macro-uncertainties in markets are tough, at least Deutsche Bank in 2011 the bank exceeded that target. Europe continue to intensify and if wholesale can say it is winning. In its most recent quarterly results, clients continue to reduce activity and avoid “The silver lining of a bad macro picture Deutsche Bank’s newly renamed corporate risk, it could be a tough time for Jain. and a tough, but understandable, regulatory banking and securities division had bounced It’s probably just as well, therefore, that picture is that the industry is finally consoli- back from the near closure of investment the corporate banking and securities division dating,” Jain says. “Some firms are starting banking markets in the second half of 2011 that Jain ran before taking over as co-chief to scale back in certain businesses and even to show €5.2 billion of revenues and €1.7 executive of the whole bank and built up withdrawing. A lot of liquidity was injected billion of pre-tax profit, with a cost-income over a 17-year career at Deutsche, is in such into the system in 2008 and 2009, so many ratio of 65% and a return on equity of 26%. good shape. The bank has long been in the firms remained active, and 2009 and 2010 Perhaps a more useful period to exam-

Reprinted from Euromoney July 2012 www.db.com Awards ine is the full-year 2011 for which, after a For so long people in our share, especially when those traders are set- dire second half and a fourth-quarter loss, business concentrated on ting up global macro hedge funds, operating the division still managed €14.9 billion of across geographic markets and asset classes, the flow and ignored the revenue, €2.9 billion of pre-tax profit and a which is what many of the ex-Goldman pro- 16% return on equity: numbers that many of tail risks. Now all that prietary traders, for example, are now doing. its peers would kill for. anyone seems to think But it is in the corporate client sphere, par- Jain’s expectation is that his successors run- about is the tail risk, rather ticularly in the US and Asia, that Rankin sees ning the corporate banking and securities divi- most progress at Deutsche Bank. He says: than the mean. There’s a sion as its co-heads, Colin Fan, head of mar- “The adjacency of corporate finance, markets kets, and Robert Rankin, head of corporate lot of good news that’s not and global transaction banking helps us gain finance, can continue where he left off. “We priced in new clients and win market share across all are fully committed to all aspects of the invest- of those businesses. For instance, we can float ment bank,” says Jain, “and any changes will Anshu Jain the business of a company owner in Hong be modest. There will be short-term ebbs and Kong, then offer the client other services like flows in profitability, driven by client volumes. transaction banking and trade finance, which But what we have built will be structurally sets us apart from several key competitors in viable in a post-Basle III, post Dodd-Frank, risk averse and not inclined to deal for the investment banking.” post-Volcker world, with a return on equity rest of this year? “A prolonged slowdown Traditionally, Deutsche Bank’s share of target in the mid to high teens.” will further test the stamina of certain banks the global investment banking fee pool looks Jain takes pride that the formidable intel- and raise the question for how long they can better when M&A, ECM and DCM volumes lectual firepower assembled among bankers carry their less profitable investment banking are higher in Europe than in the Americas inside Deutsche’s markets businesses in the divisions.” Deutsche, Jain suggests, has shown and Asia. In recent quarters it hasn’t been, heyday of financial innovation is now trained that it can pick up share in tough markets but the bank has still improved its market on solving client problems rather than devising and still earn a decent return. share by picking up business in the US and ever more exotic derivatives for its traders. especially Asia. He singles out the €12 billion longevity obert Rankin is a relative In the past 12 months Deutsche Bank has hedge for Aegon (see page 58). “Pension newcomer to the tight-knit been a joint bookrunner in the largest-ever funds are struggling to cope with long-term team around Jain who have IPO of a jewellery retailer globally, for Chow longevity exposure. That was an example of worked for years building Tai Fook Jewellery in a $2.1 billion offering taking the financial technology we had built up the corporate and invest- in December 2011; the largest-ever healthcare up over a long time and using it to create a Rment bank, converting its European debt IPO in Asia, for Shanghai Pharmaceuticals, customized client transaction. And there are markets business into a corporate finance with a $2.1 billion offering in May 2011; the many other examples.” leader and slowly building up in the US, largest insurance IPO globally in 2011, for As well as running a more client-focused traditionally the graveyard for ambitious New China Life on a $1.9 billion offer last operation, all banks will now have to run European investment banks. December; the largest-ever Reit IPO in Singa- much more efficient ones, and cutting costs Rankin, an Australian, joined Deutsche in pore, for Mapletree Commercial Trust, with is another focus for those smart minds. Jain 2009 in Asia, having run investment banking a $764 million deal in April 2011; and the says: “We have to manage expenses and so for UBS there. While taking lead respon- largest gaming IPO globally since 2009, with we’re taking our technology know-how and sibility for corporate finance in the new MGM China’s $1.6 billion offering last May. applying a lot of it to making our plat- management structure, he has an eye across Rankin points to a sign of the bank’s forms more efficient, for example, creating the markets businesses and the strengthened growing relevance as a top global investment algorithms that improve automated trading links Deutsche has enjoyed with hedge fund bank in its role alongside Morgan Stanley, efficiency, rather than creating the next-gener- and institutional clients, as other banks have Goldman Sachs and Citigroup as joint global ation complex product.” cut back. coordinator on AIG’s sell-down of $6 billion- Jain looks forward with guarded optimism. It delights him that of the six largest worth of shares in its Hong Kong-listed pan- “For so long people in our business concen- start-up funds launched by former Goldman Asian life assurance business, AIA, in March trated on the flow and ignored the tail risks. and JPMorgan traders in the past year, four 2012, with proceeds used to pay back the US Now all that anyone seems to think about have chosen Deutsche Bank to be their prime Treasury. is the tail risk, rather than the mean. The US broker. Typically as banks cut back propri- In its own right it was a noteworthy trans- has successfully restructured its economy and etary trading and great traders set up on their action in the Asian equity capital markets. the housing market there looks like it may own, they choose their old firm as one prime This was the second-largest accelerated have bottomed. Asia hasn’t slowed down that broker – new clients would probably worry bookbuild ever done in Asia. Deutsche Bank much at all. There’s a lot of good news that’s if the traders’ previous employers didn’t back commenced wall-crossing top-tier accounts not priced in. Corporate balance sheets are them – and then appoint another. Very often, globally prior to launch to generate demand very healthy and investors hold a lot of cash these days, that other will be Deutsche. It’s and the deal was covered inside eight hours that they are eager to expose to a little incre- a noteworthy validation of the bank’s broad and the books closed early to crystallize mo- mental risk in order to earn a return.” trading and prime brokerage franchises, its mentum, even though the Hong Kong market And if the markets remain slow and clients momentum and its ability to pick up market fell 1.4% on the day.

www.db.com Reprinted from Euromoney July 2012 Rankin says there is a larger story of how of decent returns on doing so. The good the bank’s capabilities in Asia have helped news for us is that more and more competi- buttress its position and credibility in the US. We need more normal tors do not offer that any more.” He says: “If you look back at the initial IPO patterns of market The inspiration for the corporate finance of AIA in 2010, the US Treasury’s re-IPO of effort at Deutsche remains the markets busi- behaviour to resume. its AIG stake in 2011 and most recently the nesses that have continued to build market accelerated bookbuild for AIA, they were Assuming it does, then share, notably in the US, and to produce all landmark transactions, and we were this platform promises returns even while continuing to reduce risk- privileged to be involved in all three. It was great operating taking. This is down by 30%, as measured a global effort, and our equity markets capa- by quarterly value at risk, from the first leverage bility across Asia Pacific, Europe and the US quarter of 2011 to the first quarter of 2012. on the AIA IPO helped build our credibility Colin Fan with AIG management and the US Treasury tour with Colin Fan over time.” around the financial In the Americas, Deutsche has picked markets right now is a up business from some demanding clients, reminder how tough a such as Charlie Ergen, acquisitive chairman business this is to be in, of broadcast satellite company Echostar. finance and Fan for the markets businesses? Aeven for a market leader. “We’re come a long way in a short time but Rankin says: “Co-heads is a proven con- The proposition at Deutsche, as for we still have some work to do in the US,” cept at Deutsche Bank. There are some banks many firms since the financial crisis, is that says Rankin. “For instance, we’re investing where, for reasons of history and culture, it it should be in the moving business not the further in natural resources. And globally, we just works. Judge us on how we manage, and storing business, that it should not build risk are number one in Europe and a top three don’t underestimate how far these businesses inventory but move it on quickly for clients, investment bank in Asia Pacific.” have integrated already. We don’t want to assuming the least risk it can. Deutsche, as He’s convinced that the size of the bank’s compete separately, we want to bring them one of the big-three firms in the rates mar- US trading operations, double the size of even closer together.” kets with JPMorgan and Barclays Capital those of certain top-tier US firms, will help it While fighting for more clients, Deutsche and a leader in credit, equity and commodi- to continue to progress in corporate finance. must also wrestle with new capital con- ties, has prided itself up to this point as a “Our sales and trading platform in the US is a straints that reduce its capacity to extend provider of liquidity to clients when other key competitive advantage as we continue to balance sheet, for example in debt and firms pulled back. But its capacity to provide build out our advisory business in the region.” equity underwriting and acquisition financ- this is now being tested by dire market As Jain, who built the business, moves into ing. Rankin says: “We want to be the scale conditions. the co-CEO seat at Deutsche, is it a back- provider with the greatest efficiency. We’re a Fan picks up the point about reduced ward step for the bank to appoint co-heads market leader at intermediating risk globally. value at risk. “We look at measuring risk in of the business to replace him, with Rankin We’ll work with clients we can help grow, all sorts of ways. Value at risk is one useful taking lead responsibility for corporate and deploy balance sheet in the expectation measure but it has some limitations such as assumptions around underlying liquidity.” A trader at different times in his 14-year Deutsche Bank has the highest return on value at risk in the industry career at Deutsche of Asian equities, global 350x convertibles and structured credit, Fan is well 300x 290x 288x 263x Q1 2012 Q2 2011 versed in recognizing patterns in financial 250x 247x 199x 195x 200x markets. But markets are now driven by poli- 155x 160x 150x 126x tics and characterized by periods of frenetic 117x 102x 81x 100x 71x 79x activity that suddenly give way to periods of 63x 54x 50x 0x 0x severe illiquidity. The best way for firms to 0x DB JPM BAML CS Barclays GS MS UBS Citi ride out the high volatility attendant on low Source: Deutsche Bank, bank financial results volumes is to be as flat as they can be. “Primary dealers have reduced cash bond Top five banks by IB revenue market share inventory levels to what they carried 10 12 years ago,” says Fan. “We’ve always prided JPM BAML DB MS Citi 10 ourselves on our ability to provide liquid-

8 ity, though every market maker must face restrictions on capital and balance sheet.” 6 He agrees that “a lot of real money investors % share 4 have legitimate concerns about a lack of

2 liquidity in the markets”. Even in markets where liquidity looks 0 United States Europe Asia Pacific Japan good and Deutsche is a clear leader, such Source: Dealogic

Reprinted from Euromoney July 2012 www.db.com Awards

as in foreign exchange, Fan is concerned. Co-heads is a proven concept cial crisis of 2008 and 2009. Deutsche is still “Volumes in FX have increased steadily fighting hard in certain battlegrounds and at Deutsche Bank. There throughout the last decade including through has much more work to do in building up in the crisis, albeit some of the liquidity is in the are some banks where, for cash equities in the US. Fan says: “Electronic euro/dollar pair which has become a simple reasons of history and culture, trading is one key battleground and we’ve barometer for European sovereign stress,” it just works. Judge us on been trying to provide differentiated new he says. “Subtle insights into economics and pools of liquidity and have brought in new how we manage, and don’t relative value aren’t much use when the un- clients and won market share. But we still derlying flows are driven by reactions to the underestimate how far these have a way to go in US cash equities. It’s the credibility of the latest political development.” businesses have integrated single biggest gap we have.” In rates markets for high-quality govern- already There are limits to how much share is ment bonds, such as those issued by the US, comfortable to have though. He says: “We’ve Germany and even the UK, it’s the same story Rob Rankin always had a gem of a business in distressed as in foreign exchange. Fan says: “There’s credit and are never complacent, but we decreasing value in analysis and all we can do have such a high share that at times it could is try and facilitate the market when volumes barely trade $10 million in a name without eventually impact liquidity.” are challenged and bid-offer spreads widen.” moving the market.” Shareholders and credit analysts must won- What about the equity markets? Trading in Global investment banking revenue by region der whether banks picking up share in such equity seems to have been particularly hard volatile and inconsistent markets might be hit by new risk weightings at a time when the 100 better off not doing so. whole thrust of regulations is pushing banks 80

Meanwhile, there is the challenge that to hold only government bonds or triple- 60 % many other government bond markets have A-rated corporates. Fan says: “Equity as an 40 become credit markets but cannot simply asset class has positive convexity on a two 20 be handed over to credit traders. And the to three year horizon – if there is a recovery, 0 credit markets themselves are all but broken. equity will reward investors while on the Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Fan says: “The market has divided into four downside, equity will protect against inflation Americas EMEA Asia Pacific groups – financials, sovereigns, US corporates and loss of confidence in fiat instruments. The Source: Dealogic and European corporates – with very little problem is near-term volatility which is taken relation to each other, and for which ratings into account in current pricing.” If that tour d’horizon makes it sound like and analysis of fundamental relative values Fan is clearly proud of the success of the a bad time to be a flow-monster trading are less meaningful. If you look at the second- bank’s long, slow organic build-out in the house, the only consolation for Deutsche is ary markets in high-yield bonds, bid-offer US bond markets to a number one position, that being one is probably preferable to the spreads are wider than ever, and you can which took on added urgency after the finan- alternative. Even in financial markets that are driven more by political pronouncements Top-10 banks Investment banking wallet share since 2008 than economics and commercial considera- Bank 1Q12 1Q11 1Q10 1Q09 1Q08 tions, being in the flow brings some informa- JPMorgan 7.9 8.4 7.5 8.3 7.5 tion advantage. And rather like investors that BAML 6.2 7.6 6.6 7.0 9.1 must ride out the short-term volatility, the big Deutsche Bank 5.6 5.6 5.5 5.0 4.3 trading firms such as Deutsche might find the Morgan Stanley 5.4 5.5 4.8 5.3 4.6 long-term prize is well worth clinging on for Citi 5.3 4.3 4.8 6.6 5.9 if they gain significant pricing power. Credit Suisse 5.3 5.4 4.7 3.7 4.5 “There used to be a dozen relevant global Goldman Sachs 5.3 6.0 6.4 5.3 6.4 firms, now there are only half that number”, Barclays 4.4 4.5 3.6 3.4 3.8 says Fan, “with a premier league of three UBS 3.4 3.5 4.1 5.8 4.7 or four that are robust, healthy and with a RBC 2.7 1.5 1.5 1.2 1.3 long-term sustainable business model. For a Source: Dealogic while, this period of regulatory change may perversely obscure differentiation between Deutsche Bank has cut value at risk significantly firms. But as more banks realize the necessity Q1 2012 Q4 2011 Q1 2011 Q1 12 v. Q4 11 Q1 12 v. Q1 11 to transform their business models, and with Goldman Sachs 101 142 115 (29%) (12%) the barriers to building a platform like ours Morgan Stanley 89 129 123 (31%) (28%) high, the advantage should follow. JPMorgan 67 60 65 12% 3% “We need more normal patterns of market Deutsche Bank 55 56 81 (1%) (31%) behaviour to resume. Assuming it does, then Barclays n.a. n.a. n.a. n.a. n.a. this platform promises great operating lever- Source: Deutsche Bank, bank financial results age.”

www.db.com Reprinted from Euromoney July 2012 Best GLOBAL investment bank Deutsche Bank The bank has made further progress in equity capital markets and M&A, winning many new clients, building on its familiar leadership in flow markets, all while dialling down risk

eutsche Bank’s leadership in global investment market for non-US firms to break into, it is now comfortably inside banking is built on the foundation of its dominant the top 10 as an equity arranger, according to Dealogic. It has made position across most of the traded financial markets. strides in key Asian markets, for example now being inside the top In foreign exchange, it has been ranked number one five in Hong Kong. for market share in Euromoney’s annual ranking A noteworthy success was being named one of the active joint book- Dfor eight years. It is the top-ranked firm globally in all rates deriva- runners on AIG Group’s $8.7 billion re-emergence offering in May tives across the major currencies, according to Euromoney’s survey 2011. Deutsche Bank was also included on AIA’s $6 billion sell-down published in March. Intriguingly, for a bank headquartered in the in March: the second-largest accelerated bookbuild ever done in Asia. eurozone, Deutsche is now the top-ranked firm for market share in dol- Being included on those required credibility with the US government, lar rates: the goal of long and steady investment by the bank. the vendor of the AIG stake, as well as strong equity capability in Asia. Since Anshu Jain, then co-head of Deutsche’s corporate and invest- In M&A, a business so long dominated by a small handful of firms, ment bank and now co-chief executive of the whole bank, took the key Deutsche now ranks third in Europe and is established in the top 10 strategic decisions three years ago to close down proprietary trading in the US. Growing numbers of US and Canadian companies are now and exit some of the principal businesses at the centre of the financial choosing Deutsche over US firms to advise on complex overseas acqui- system crisis in 2008 and 2009, Deutsche has concentrated its bankers’ sitions, for example Colfax on its £1.5 billion ($2.3 billion) purchase efforts on addressing customers’ requirements instead of devising ever- of Charter, a company three times its own size, and Molson Coors on more complex products for its traders. its €2.65 billion acquisition of Starbev. A classic example: in March 2012, Deutsche executed the largest- Deutsche is a growing force in China-related M&A. It was sole ever longevity hedge, for Aegon, by finding a way to distribute longev- adviser to CGNPC on its $2.2 billion acquisition of Kalahari Minerals ity risk to real-money investors for the first time. in February 2012. It advised the Moreira Salles family of Brazil on The deal transferred risk from €12 billion of Aegon’s €30 billion of the September 2011 sale of a $1.95 billion 15% stake in CBMM to a Dutch reserves. As well as being the largest-ever such trade, it was the Chinese consortium that included Citic – the first overseas acquisition first to reference population mortality in continental Europe, in this by a state-owned Chinese company. case the Dutch population, with a series of model points representative, The bank is now a force in the big global M&A deals, for example in demographic breakdown and annuity amount, of Aegon’s underly- advising Xstrata on its $48 billion merger with Glencore, which will be ing portfolio. This transaction enables Aegon to manage economic the largest-ever mining M&A deal, assuming it is approved. capital in such a way that it can increase the capacity of its pensions Deutsche Bank has won many new corporate clients in the past year, business. such as Echo Star, BTG Pactual and Saudi Electricity, after building a In the classic corporate finance businesses, Deutsche Bank made new integrated corporate coverage model. For many of these compa- further progress this year, building far beyond its traditional strength nies, Deutsche Bank’s ability to offer strategic advice, financing and risk in debt capital markets. Again, the key breakthroughs have been in management has been a key selling point. the largest market with the biggest revenues. As well as being the top- The breadth and depth of its business model has served it well in ranked firm in US dollar rates, Deutsche is now a top-five US debt capi- 2011/12: a year that put European banks at a disadvantage to US tal markets house, complementing its position as the top debt markets banks but during which Deutsche Bank improved its position across al- bookrunner in Europe in the 12 months under review. most every area. It is noteworthy that Deutsche managed all this while Similarly in equity capital markets, Deutsche has the top market reducing its value at risk by 30% from the first quarter of 2011 to the share for Europe, and is the only firm with a share above 10% in first quarter of 2012. That is more, by far, than any other leading bank the period under review, putting it ahead of Goldman Sachs, Credit that reports quarterly value at risk in a comparable way. Its investment Suisse, JPMorgan and Morgan Stanley. In the US, always the toughest bank also reports a return on equity well above most of its peers.

Reprinted from Euromoney July 2012 www.db.com Awards

BEST GLOBAL RISK ADVISER DEUTSCHE BANK Structuring novel trades in volatile markets separates the bank from the risk crowd

eing able to help clients with a rising tide of problems long duration. Through a novel structure, the bank found a way to while limiting their own risk is the tricky challenge address these concerns by linking the payments to a public longevity facing risk management houses today. index and reducing maturity to 20 years. Immediately following the Deutsche Bank coped with the pressures applied by hedge, the share prices of Aegon and Rolls-Royce rose substantially. tumult in the markets better than others, particularly Another aspect of risk management in which Deutsche is playing Bwhen it came to structuring neat ways to bring a stretched balance a leading role is portfolio diversification. Since the global financial sheet to bear across all asset classes. crisis, with markets so volatile, beholden to (mainly bad) news and Risk management is embedded into correlated, many traditionally accepted asset the culture and structure of banks such as allocation procedures no longer deliver true Deutsche and shortlisted rivals BNP Paribas portfolio diversification. Last year, Deutsche and HSBC, setting them apart from many Bank worked with PKA, a Danish pension competitors that appear to see risk manage- fund, to develop a solution to this grow- ment as an overlay that can be imposed on ing problem. This involved PKA switching top of existing businesses. At its heart, good We were able to pass from an asset-allocation model based on risk management comes down to effective on large amounts of geographical and asset-class weightings to communication across areas of expertise risk taken on during one based on risk-premia analysis, with within a particular firm, enabling it to struc- capital allocated to a broad range of trading ture solutions that would not be possible in a trades to third parties strategies chosen for their low correlation bank with silos or bad cross-asset and cross- looking for that with each other. This so-called risk-factors border cooperation. To manage risk well exposure approach is becoming an increasingly im- banks need to understand the elements to portant aspect of modern portfolio theory. which they are exposed with absolute clarity. Ram Nayak Deutsche has also advised many banks Deutsche Bank says the key to doing well on reducing risk by selling off non-core this year with respect to its own risk profile assets to raise their capital ratios to levels and the ability to manage the risks of others required by regulations such as Basle III. For is the distribution of that risk. “We were able example, last year Deutsche advised Bank of to pass on large amounts of risk taken on Ireland on the disposal of its project finance during trades to third parties looking for that book. exposure,” says Deutsche’s Ram Nayak. Several other banks, he added, The innovation displayed by Deutsche was perhaps the main reason had to hold the lion’s share of risk on their own balance sheets. it beat impressive rivals in risk management such as HSBC and BNP Deutsche adds that its ability to hedge longevity risk, which arises Paribas. Judging risk management is no easy task as it is by no means because of ageing populations, is a prime example of how it has set an exact science, more a way of doing business that has to flow itself apart. Longevity risk has always been tricky and expensive to through a firm from the top down. hedge because only a few institutions are willing to assume the risk An example of innovation comes through Deutsche Bank’s work on their books. In November last year, Deutsche arranged a £3 billion with European power producers to hedge their exposure against ($4.7 billion) 40-year trade for Rolls Royce that hedged the aero-en- changes in the price of power far beyond the five years at which most gine maker against risk on its main UK pension fund. And in February banks are willing to do trades. Deutsche surmised that it could take this year it completed a €12 billion hedge for Dutch insurer Aegon, the on the positions because it had confidence it would be able to sell largest longevity hedge ever done by a corporate. electricity to consumers at a later date. These deals enabled clients to The bank says the crucial breakthrough was opening up the market proceed with refurbishment and construction of new power stations to institutional investors to which most of the risk on the Aegon deal knowing the internal rates of return they would make. For this and was transferred. Historically, such investors have steered clear of buy- many other structured solutions, Deutsche Bank is Euromoney’s best ing longevity risk because it is difficult to analyse and has exceptionally global risk adviser.

www.db.com Reprinted from Euromoney July 2012 Best GLOBAL High Yield House Deutsche Bank Deutsche demonstrated the ability to tackle off-the-run deals in challenging conditions last year to cement its leading position in high yield

he past 12 months has been a rollercoaster ride for to give full proportional voting rights to bondholders in a restructur- the high-yield market. It has enjoyed periods of record ing. The prevailing view had been that the deal would come in dollars inflows and new issuance, as well as extreme volatil- but in the end the euro tranche was the larger one. ity and sporadic access. Navigating such a choppy “If a deal is properly marketed in Europe, it can get done,” says seascape requires not only a first-class origination and Johnsson. This was also demonstrated with HeidelbergCement’s Tdistribution platform but also a truly global franchise. Deutsche Bank SFr150 million ($156.7 million) deal in October. Deutsche sole-led the has demonstrated both over the past year and is Euromoney’s global deal, through which the company diversified its funding sources, and high-yield house for 2012. achieved this at a 100 basis point discount to primary euro issuance it “We are not a commoditized lender and our high-yield business is had undertaken two weeks earlier. not based on capital commitment,” says Mark Fedorcik, global head of Deutsche’s strength in Europe is a given, considering its status leveraged DCM at Deutsche Bank. “We have among German corporates, but it also has to compete with hustle and ideas. In future clout worldwide. “In Asia the challenge is to every company in every country is going to compete with bank debt – it is the reverse of want a pipe into the rest of the world and no the situation in Europe,” says Johnsson. “But other high-yield house is as well positioned we can compete by doing different things: as we are across the US, Europe and Asia to foreign currency, hedging. You need a much provide this.” The value of broader product suite.” The bank was joint The persistent problems in the eurozone our business is bookrunner on Shui On Land’s $400 million precipitated a wave of issuance in US dollars three-year deal in February, the first Chinese in cross-border from the region’s corporates. While Deutsche issuer to tap the market since May 2011. has been dominant in this business, it has deals, first-time It is a top-five bank in the US, competing also impressed with its efforts to maintain issuers, smaller against domestic banks with large lending issuance across currencies. “As a lot of illiquid trades platforms. “Companies want to use banks companies gravitate towards dollars we are that will deliver,” says Fedorcik. “The value focused on keeping issuance in euros,” says Mark Fedorcik of our business is in cross-border deals, first- Henrik Johnsson, head of European high- time issuers, smaller illiquid trades. Many yield capital markets. “We don’t want to of our competitors concentrate on straight- lock companies that don’t have a reason to forward T-plus-300bp business – we will issue in dollars out of the market.” concede T-plus-300bp business all day.” When Polish telecoms firm Polkomtel was Colorado–based satellite and video opera- looking to clear its hung LBO bridge loan in tions company Echostar mandated Deutsche January, the initial view was that the deal would come in dollars. “We as sole left lead in its $2 billion issue to fund the acquisition of Hughes had done a lot of pre-wiring for Polkomtel in the US and had done a Communication. This was the largest sole bookrun offering in the past non-deal roadshow,” says Johnsson. “We thought the deal might be all 12 months. Deutsche was also sole bookrunner on satellite TV firm dollar but we had a lot of success in euros, which resulted in a better Dish Network’s $1.9 billion trade, which at 4.625% for five-year notes outcome for the issuer.” The €900 million equivalent deal was the was the tightest true high-yield execution in over a decade. largest CEE high-yield bond ever and included the first PIK issuance In terms of global reach it would be hard to top the Consolidated by a company operating in Poland. It included $500 million and €542 Minerals deal, which closed in April last year. The $405 million five- million tranches that yielded 12% to 12.5%. year deal was for a manganese-ore producer company owned by a Deutsche’s dominance in the euro market was again in evidence on Ukrainian with mines in Australia and Ghana that sells its product to the February jumbo transaction for Schaeffler, a German ball-bearing China. “We organized a roadshow in Singapore, Hong Kong, London manufacturer. The €2 billion deal, part of the company’s €8 billion and the east coast [of the US] – it is very rare for that to be done for a bank and bond refinancing, was the largest ever transatlantic deal for high-yield deal, it was very unconventional,” says Johnsson. “We don’t a debut issuer and the first jumbo deal in Europe since June last year. It do off-the-run stuff. We do business that requires brains and energy.” was also the landmark deal for the European market as it was the first

Reprinted from Euromoney July 2012 www.db.com Awards

Best GLOBAL Commodities House Deutsche Bank An aggressive organic growth strategy has propelled the firm into the top tier of the commodities trading market

arclays and JPMorgan most recently may have led Louise Kitchen, global head of commodities structuring and sales, the way in taking the fight to Goldman Sachs and says: “We started with a base of precious metals and investor prod- Morgan Stanley in the global commodities market, ucts, and expanded out from there, enhancing our offering across the but a new contender has emerged and is taking on the physical and financial markets of European natural gas and power, ruling hierarchy. crude and refined products, carbon, US gas and power and base BIn the past year, Deutsche Bank has broken into the commodities metals. More recently, we added agricultural products and bulks.” firmament and is now showing the type of momentum that sug- She adds that once these building blocks were in place, Deutsche gests it can continue to take market share from the once dominant then “layered in the commodity client offering with the wider bank- quartet. ing franchise products” such as its corporate finance franchise, credit Faced with heightened competition between banks for deal flow, and finance capabilities, as well as structuring and the institutional low prices and slim trading volumes, Deutsche’s commodities busi- client coverage groups. ness still attracted a healthy number of new clients and revenues hit This has undoubtedly proven a compelling proposition to clients, a record. whether corporates or hedge funds, and one of the main reasons Although the bank does not break out earnings for commodi- Deutsche has made strong gains. ties, analysts estimate revenues hit about $1 billion in 2011 on the “By combining our financing, structuring and physical capabili- back of successful trades in aluminium, precious metals and gas and ties, this has enabled us to get straight to the heart of the problem a power. client faces,” says Richard Jefferson, head of commodities sales. With Goldman Sachs and Morgan Stanley generating revenues es- Supplementing this capability has been Deutsche’s ability to link timated to be between $1.5 billion and $2 billion from commodities hedge funds and corporates directly, which, in turn, has meant that trading, Deutsche can claim to be a top-tier house by revenues. it hasn’t had to load large amounts of risk onto its balance sheet, Its market share in the lucrative over-the-counter energy and com- enabling it to execute some big trades. modity derivatives markets has surged too. On the physical side, Deutsche has significantly expanded this According to a Greenwich Associates survey this year of over 250 business by offering clients the type of sophisticated financial solu- of the main companies globally that hedge energy price exposure tions it has long been known for in other markets. And it was critical using OTC derivatives, Deutsche works with a third of them. By for Deutsche to do so. comparison, Deutsche has 40% market share among 70 of the top “It’s only by being involved in the physical side of the busi- global commodities investors – up 7% on the year before and the ness that enables you to get closer to what clients need,” says Bill highest percentage gain of all the top banks. Gebhardt, head of European power and gas trading. Combined, that’s an impressive achievement for an investment Being in tune with investor appetite is just as important, and here bank that five years ago had nothing of the full-scale capabilities it Deutsche’s commodity investment products business excels. has today across both financial and physical products in the global Assets under management increased to over €22 billion for non- commodities market. benchmark products alone year on year, and its client base grew to Since the acquisition of Bankers Trust in 1998, Deutsche has been over 1,000 institutions in more than 30 countries. The proliferation particularly active on the financial or derivative side of commodities, but of new products such as the physical metal exchange-traded com- without meaningful penetration in physical products it trailed its rivals. modities has been a key driver of growth. The catalyst for change came in 2007 when Deutsche hired David Looking ahead, Jefferson believes clearing could be one area Silbert from Merrill Lynch, where he was the European head of where future growth in the commodities business could come. commodities, to run the global commodities business and ultimately “Given the new regulations, clients are going to demand a seam- build a more powerful and profitable franchise. less provision of service between OTC, cleared swaps and futures,” Today, Silbert says that “having built a diverse platform from the he says, adding: “When you look at our competitors they tend to ground up across the entire commodities space, whether physical or either compete on the physical side, or the derivative side, or the financial,” Deutsche has achieved its goal of creating a “top rated listed side, and so one of the elements in which we are trying to serve global commodities house”. clients better in the future regulatory environment is to combine all Core to achieving that was bringing in the right people to help of those capabilities. If you can get that right then clients will reward realize a clear, methodical and aggressive growth strategy. that efficiency and service.”

www.db.com Reprinted from Euromoney July 2012 Best GLOBAL prime broker Deutsche Bank As hedge fund assets return to pre-crisis levels, banks are increasing their efforts in prime brokerage. Deutsche Bank is already there

aving a prime brokerage relationship is a lot like in its capital introduction, consulting and start-up service groups. being married,” says Barry Bausano, head of global Of the six largest start-up funds launched by former Goldman Sachs prime finance at Deutsche Bank. “It is a very en- and JPMorgan traders in the past year, four have chosen Deutsche Bank twined relationship connecting you with the client in as their prime broker. reporting, execution, finance, platform – and those Deutsche Bank is also one of the few players that can truly turn its Hinterdependent relationships tend to be long lasting.” hand to any asset class. Goldman Sachs deserves credit for being the That made it difficult for Deutsche Bank to nudge into the top prime broker of choice for equity hedge funds that make up most of the two before the financial crisis in 2007/08. The bank was winning hedge fund industry, but the trend towards multi-strategy has played clients based on its international presence and deep product range to Deutsche’s advantage. It has a deep product range across credit, FX but Goldman Sachs and Morgan Stanley were firmly entrenched at and equities and is structured so it can provide financing across assets. the top. When confidence in Wall Street firms “It requires a lot of operational and was shaken in the crisis, that dominance was financial efficiency to finance assets in undermined, with clients looking for multiple addition to equity without overburden- prime broker relationships to spread their risk. ing your balance sheet,” says Bausano. Deutsche Bank won most of that diversifying “We have been structurally creative business and, while competitors were licking We have been consolidating risk, margins and report- their wounds, the German bank commit- structurally ing across all assets. One of our biggest ted itself to ensuring that it would retain its competitive advantages has always enhanced market share even after the markets creative been that we have our synthetic and had settled. consolidating traditional financing integrated within The strategy of a seamless multi-asset class risk, margins prime finance.” Many prime brokers platform and commitment to start-up funds and reporting have put synthetic financing into their has resulted in the firm receiving Euromoney’s equity derivatives business, so end up award for best global prime broker. across all assets competing for the client on two sides. It was a brave decision in 2008 to make the Deutsche Bank’s emergence as a top- Barry Bausano call that the hedge fund industry would grow tier electronic execution provider along beyond its $2 trillion peak, given the difficult with its financing expertise has enabled markets and lower performance of many it attract many of the world’s largest strategies. Bausano says it was a secular bet: high-frequency trading funds as clients “The asset/liability mismatch in pensions was over the past two years – the final gap a key indicator that there would be significant in its offering. demand for alternative investments to compensate for low returns on Bausano sees the prime brokerage market as continuing to evolve over passive equity index holdings and government bonds. Consequently the next few years. Those competitors that lack balance sheet and can we were confident that the pressure to find good managers would only focus on equity products, he says, will narrow their client focus. increase, and institutional asset inflows would return industry AUM to Those that can service clients across a broad range of products will beyond the prior peak.” reap the rewards. Barclays, for example, makes this year’s shortlist There were far fewer start-ups during and directly following the because it has ensured it is set up to be product agnostic and has been crisis. However Bausano says those that launched were incrementally seeing its client base increase. more important than ever. And while some competitors turned away Optimal balance-sheet efficiency in a post-Basle III world will be a from courting start-ups, Deutsche Bank increased its commitment. key to success. Additionally, the trend towards internationalization will “For a start, we knew that managers who could launch a fund despite continue, and those with a narrow domestic bias will need to expand the crisis would be very high calibre and very credible – so we thought their geographic presence, says Bausano. start-ups of this vintage were actually very promising,” he says. It will be hard to catch up with Deutsche Bank though. Clients are “Regulation drove talented risk-takers out of bank prop desks, and indeed like spouses and are not easily pulled away. Growth might have the economic dynamics of hedge fund high-water marks encouraged to come through enticing start-ups away from the German bank. It re- many key lieutenants of established funds to strike out on their own.” mains to be seen whether or not competitors have the start-up platform So while competitors were cutting resources, Deutsche Bank invested to compete.

Reprinted from Euromoney July 2012 www.db.com Awards

AWARDS REGIONAL AWARDS REGIONAL AWARDS

UNITED STATES LATIN AMERICA WESTERN EUROPE

BEST FLOW HOUSE BEST RISK ADVISER BEST INVESTMENT BANK DEUTSCHE BANK DEUTSCHE BANK BEST EQUITY HOUSE BEST CASH MANAGEMENT HOUSE DEUTSCHE BANK

eutsche Bank is this year’s he breadth and depth of prod- nder attack from all sides, best US flow house. Its com- ucts offered by HSBC gave the few of Europe’s leading bination of product innova- bank a strong claim in the risk banks could claim to have tion, strong balance sheet adviser category but last year’s won many battles in the and distribution enabled the winner, Deutsche Bank, retains past year, and fewer still Dbank to expand its share in flow products over Tthe award for having demonstrated its mar- Ucould offer much optimism that they are the period despite volatile markets. Not having ket-leading ability to innovate and execute winning the war. to shed risk, the bank was able to concentrate tailored and effective risk solutions for cli- Whether it is the eurozone sovereign debt on market-making. In the summer of 2011, ents. An example of this is when a corporate crisis and faltering economic growth on one when many US investors wanted to sell their client wished to hedge the US dollar principal front, or the spectre of another acute fund- dollar-dominated European corporate credits, of a new 10-year issuance into local currency ing crisis, round of bailouts and onslaught of the bank was able to complete a large sale of but couldn’t afford to trap cash as collateral new regulation on the other, Europe’s lead- Italian credit for a US insurance company by resulting from mark-to-market movements ing banks are facing immense challenges, distributing it through its sales force in Italy. of a long-dated hedge. The client was also and the pressure is taking its toll. “There was a flight to quality within the US, concerned about receiving the best possible Driven in large part by staggering losses, so being global was essential,” says Jeff Mayer, price, while at the same time distributing the the market capitalization of the western head of corporate banking and securities in transaction among its relationship banks. European banking sector has plummeted North America. Deutsche Bank also has the Deutsche proposed to carry out the 58% from 2007 through to 2011, according leading FX platform globally as confirmed market risk and credit risk syndication of a to Boston Consulting Group, and European by Euromoney’s FX poll. When it comes to 10-year option structure with a deferred pre- banks’ share of the entire banking sector’s innovation and growing markets, Deutsche mium profile, which allowed the client to pay global market capitalization was 23% last Bank excels. The firm increased its market the premium over time. Through this trans- year – down from 35% in 2007. share in the US inflation derivatives market for action the bank was able to execute market Revealingly, Banco Santander and BNP last year to 19% with the number of clients in hedges for the full notional of the transaction Paribas are today the only eurozone banks 2011 triple that of 2010. Capstone, the most in an illiquid market and then helped the left in the world’s top 30 banks by market active US inflation-oriented hedge fund, traded client syndicate the transaction among its top capitalization, illustrating just how far inflation derivatives almost exclusively with relationship banks. Deutsche provided the former titans such as UniCredit, UBS, Royal Deutsche Bank, totalling around $2.7 billion market hedges for these relationship banks Bank of Scotland and Deutsche Bank have over 2011. It also traded almost $1.5 billion of so that the client could further reduce the fallen. inflation swaps with BlackRock from 2011 to bid-offer paid for market risk hedges. And, But while Banco Santander can rely on March 2012. at the same time, Deutsche kept a portion the earnings support of its lucrative Latin In 2011 the bank also launched the first US of the transaction on its books with a clean American banking business, which now inflation breakeven exchange-traded prod- credit line for the client. accounts for about 50% of its group profits, uct taking out exposure to rates. In equities, BNP Paribas cannot call on anything like the Deutsche Bank is number one in the US block- same level of support from outside its core trading league tables, with over $4 billion of European market. deals in 2011, and was left bookrunner on This is why the resilience BNP Paribas has GlaxoSmithKline’s record Quest Diagnostics shown this year to the challenges the entire trade. In commodities, the bank is on a growth banking sector faces stands out, and why it trajectory. It expanded its physical business takes the Euromoney award. while other firms are pulling back. Indeed, the French bank has not only

www.db.com Reprinted from Euromoney July 2012 demonstrated an ability to adapt well to dollar funding requirement by $65 billion with €647 million, which was over €140 the new banking environment in maintain- and strengthened its cash balance sheet. At million more than third-ranked Credit ing profitability, but has also strengthened the end of March, it had a €51 billion sur- Suisse. its solvency without external capital and in plus of stable funding and a liquidity buffer One of Deutsche Bank’s standout M&A good time. equivalent to about 100% of short-term deals was its role as joint financial adviser Although net income for 2011 was down wholesale funding needs. and joint corporate broker to Xstrata 20% on the year before, BNP Paribas still Reflecting on his first six months as on its still-live $48 billion mega merger managed to generate an impressive €6.1 group chief executive, Jean-Laurent Bon- with Glencore. Other notable deals in the billion for the year and despite incurring a nafé can be pleased with the performance natural resources sector include its role as hefty €3.2 billion Greek debt impairment of the bank and its strength, but he will be sole financial adviser and corporate broker charge, equivalent to 75% of its sovereign keenly aware of the many battles that are to UK utility Northumbrian Water on its debt exposure to the country. With €3 still to be fought. £4.8 billion ($7.5 billion) acquisition by a billion of net income in the first quarter of With BNP Paribas in robust shape, the consortium led by Hong Kong billionaire this year alone, BNP Paribas is maintaining bank is perhaps perfectly poised to lead a Li Ka-shing’s Cheung Kong Infrastructure positive momentum. counter-attack. Holdings. Asset sales have helped too. The bank Deal volumes in mergers and acquisitions Deutsche was also sole financial adviser sold its 28.7% stake in French real estate and primary markets issuance in equity and to CGNPG (China Guangdong Nuclear investment company Klepierre, resulting in debt were down on the previous year, but, Power Group) Uranium Resources on its a capital gain after tax of €1.5 billion. as ever, that just heightened the competition $2.2 billion acquisition of Namibia-based However, the underlying performance of between investment banks to win business Kalahari Minerals, the largest-ever deal in businesses has been a key driver. in western Europe. the uranium sector. Last year retail deposits increased by Top among the leading M&A advisers, In the financial institutions and indus- 6.4% on the year before, and outstanding by volume, was Goldman Sachs, which trial sector, Deutsche acted as sole adviser loans were up 2.9% in the first quarter of advised on 101 transactions worth a com- to ING on its sale of ING Direct USA to 2012 compared with the same period a bined $225 billion, equivalent to a 31.6% Capital One for $9 billion – the largest year earlier. share of the market, according to Dealogic. M&A deal in the US FIG sector since 2008 Broken down by country, pre-tax income In equity and debt capital markets, how- – and was the sole adviser to UK Financial from retail banking in France was up ever, there was no such outright dominance Investments (UKFI) on the £1 billion sale of 12.5% at €1.96 billion in 2011 on loan by one investment bank and the margins Northern Rock to Virgin Money. and deposit growth of 5.2% and 8.4%, of difference between the top three in each In ECM, Deutsche Bank reopened respectively. Loan and deposit growth also market were much tighter. the European IPO market in 2012 with boosted pre-tax income in Italy to €502 But it is often in the throes of such landmark listings of Swiss service company million – up 16.2% on 2010 – and to €809 tough competition that the best investment DKSH, Dutch cable operator Ziggo and million in Belgium and Luxembourg – up banks emerge on top and that’s precisely UAE healthcare provider NMC Health. 18.9%. what Deutsche Bank did in the past year, The bank was also bookrunner on the main Meanwhile, BNP Paribas was one of affirming the strength of its franchise in a rights issues of the past year, including few banks to pay a dividend of any size in particularly difficult environment. Commerzbank’s €11 billion and UniCred- 2011, rewarding shareholders with €1.20 Ranked top in European equity and debt it’s €7.5 billion capital raisings, as well as per share, corresponding to a 25% payout. capital markets, the German investment the €5 billion rights issues for Porsche and And with an increased common equity tier bank successfully fought off fierce competi- Intesa Sanpaolo. 1 ratio of 10.4% and a return on equity of tion from Goldman Sachs and Credit Suisse Deutsche Bank’s performance in DCM 8.8% (return on tangible equity of 11.1%) in ECM, and Barclays and HSBC in DCM was similarly strong across asset classes, for 2011, the bank not only offered inves- to complement its top-three position in industry sectors and countries, with per- tors robust capital strength but also the M&A. haps one deal in particular exemplifying its highest ROE of any of the leading eurozone Still willing and able to commit its ability to get complex, high-profile deals banks. balance sheet, Deutsche Bank also ranked done amid difficult market conditions: There are weaknesses, however. BNP fourth as a mandated lead arranger of Greece’s €206 billion PSI debt exchange in Paribas’ eurozone sovereign debt exposure syndicated loans in western Europe. March 2012. remains an acute concern to investors, Such a strong performance by volume Deutsche Bank not only led the media- albeit less so than to those of many of its of deals executed across each of the three tion between the myriad stakeholders but European peers. And its ability to fund main markets was further vindicated by also sole underwrote the €35.5 billion issue itself should the situation in the European Deutsche’s performance in the fee-income by the European Financial Stability Facility financial system deteriorate rapidly could league tables for western Europe, which the that provided the cash component of the prove problematic, analysts argue. investment bank topped with €651 million deal. Sensitive to such concerns, the bank has of total fee income generated across M&A, Equally important, the performance of made progress there too: it reduced its US ECM and DCM. JPMorgan ranked second the investment bank’s sales and trading

Reprinted from Euromoney July 2012 www.db.com Awards

business in Europe has been robust and did nothing to hurt Deutsche’s reputation US dollar market while avoiding FX risk on helped the corporate banking and securities in the IPO business in Europe. the warrants. It was a transaction that took division generate a market-leading return In 2012, Deutsche Bank reopened the Deutsche’s competitors by surprise. on equity of 26% at the end of the first European IPO market with the landmark The award for best cash manager in quarter of 2012 despite a 30% cut in value listings of Swiss service company DKSH, western Europe was hard fought this year, at risk during the period. Dutch cable operator Ziggo and UAE with Citi presenting strong credentials. Anshu Jain and Jürgen Fitschen, who healthcare provider NMC Health. These However, Deutsche Bank has won once officially took over as co-CEOs of Deutsche transactions were key milestones in the again on the strength of impressive revenue Bank at the end of May, will have ap- short-lived revival of the capital markets growth, strong market share and innovative plauded this performance but one of the in the first few months of this year and mandates from clients. new bosses in particular will doubtless be Deutsche Bank was the only bank involved The bank has a wide network in the pushing harder to ensure this lead is not in all three of them. In addition, both region, offering full services from its own lost to rivals. DKSH and Ziggo were priced at the top branches in 14 countries and more limited In western Europe as much as in the of the range, with books several times offerings from partner banks in a number global market, Barclays, Deutsche Bank and oversubscribed, and they continued to trade of others. JPMorgan continue to hold a vice-like grip above issue price in the secondary market. Deutsche’s strength in the region was on the core flow businesses, and a power Ziggo listed at €21 a share and traded at recognized in Euromoney’s 2011 cash shift is unlikely to come in the near future. €26 in mid-June. DKSH floated at SFr48 management survey, in which it was voted Indeed, bank analysts argue that there ($51) and was at SFr49.90 as Euromoney by financial institutions as the top provider is greater likelihood of the three further went to press. of cash management services in euros, and extending their lead, and particularly in Eu- Many other IPOs of the latest year’s second in dollars. The bank has a roughly rope, which is undergoing by far the biggest generally disappointing vintage are trading 20% market share in euro clearing. changes in the investment banking industry. well below issue price, handing buy-and- Deutsche showcased its ability to deal Amid a difficult trading environment hold investors a loss. with multiple countries and currencies in during much of 2011, these three banks Although Deutsche Bank has bid less ag- its mandate from Swedish household appli- have shown a canny ability to adapt, mak- gressively than some of its competitors for ances manufacturer Electrolux. It imple- ing gains where possible and adjusting their block trades in the volatile equity markets mented a system spanning 12 countries and businesses where necessary. Keeping costs of the past 12 months, it has topped the five currencies, across 180 accounts. under control while maximizing income rankings in other important sub-sectors of from the most lucrative of clients has been the equity capital markets aside from IPOs, a priority. Enhancing electronic execution notably in rights issues and equity-linked Austria platforms has helped achieve this. offerings, which have enjoyed a revival in Deutsche Bank topped the European eq- recent months. Best Investment Bank uity capital markets league table rankings, Deutsche Bank acted as joint global Deutsche Bank acting as bookrunner on a greater volume coordinator and joint lead bookrunner in and a larger number of deals than its clos- the largest capital increase in the western est challengers. It ran nearly $12 billion- European automotive sector in decades: worth of equity raising between the start of Porsche’s €5 billion rights issue in the sec- the second quarter of 2011 and the end of ond quarter of 2011. The bank has played Deutsche Bank’s investment banking the first quarter this year on 36 transac- a prominent role in bank capital raisings franchise in Austria is traditionally strong, tions, giving it a 10.2% market share. That across Europe. and this year has been no different. The compares with $11 billion for second- In June 2011, Deutsche Bank acted as bank topped Dealogic’s ECM league table by placed Goldman Sachs from 25 deals and sole process bank, joint global coordinator value of deals for the period and was ranked $10.5 billion from Credit Suisse from 29. and joint bookrunner in the innovatively second in DCM. Deutsche Bank also led the league table structured two-step transaction by which Top among its equity deals last year was its rankings last year but in the most recent pe- Commerzbank raised €11 billion. This bookrunner role on the €619 million IPO for riod under review has increased its market consisted of a €5.7 billion conditional Austrian cellulose fibres group Lenzing and share from 9.5% last time. This is perhaps placement of equity securities and a €5.3 its majority owner, a transaction that marked all the more impressive for the fact that billion rights issue. the largest ever from the country’s chemicals as corporate broker to Xstrata, the bank It also brought its deal-structuring skills sector, and the first sizeable IPO from Austria was conflicted out of the IPO for Glencore, to bear for corporates. Deutsche was sole since 2007. the largest single deal in the period under global coordinator on Siemens’ $3 billion Deutsche was also involved in the €750 review. bond with warrants in February 2012, the million rights issue for OMV, the largest oil Given what subsequently happened to largest corporate equity-linked transaction and gas energy company operating in emerg- Glencore’s share price that might not have of the past 10 years. It used a tailor-made ing Europe, to bolster its balance sheet after been a bad deal to miss out on. It certainly structure to enable Siemens to tap the RegS acquisitions.

www.db.com Reprinted from Euromoney July 2012 In DCM, Deutsche acted as a joint book- on Deutsche Bank to a later date. runner on the largest bond issue from Austria Moody’s said German banks were still over the awards period: a dual-tranche “meaningfully” exposed to structured REGIONAL AWARDS combined €5 billion issue for the Austrian credit, peripheral countries and problematic Federal Financing Agency. The issue was split sectors such as shipping and finance, and between a €3 billion 10-year tranche and a that they had limited capacity to deal with CENTRAL AND EASTERN €2 billion 50-year tranche – the longest fixed- losses, given weak profitability and com- EUROPE maturity euro-denominated government bond paratively small amounts of equity relative over the period, and the first 50-year in the to total assets. BEST INVESTMENT BANK sector since early 2010. For Deutsche Bank, particularly, this last BEST RISK ADVISER On the corporate side, the bank acted as point might resonate. Deutsche has total joint bookrunner on Austrian Federal Rail- assets of close to €2.1 trillion and total DEUTSCHE BANK ways’ €1 billion bond issue in October 2011 equity of €56 billion. These figures seen – the second-largest corporate bond sale in side by side are stark, but Deutsche would Austria over the period. argue that it has ample capital and liquid- ity to satisfy international and domestic In investment banking, four banks can regulators. boast a top-10 position in each of the Germany In its home market, Deutsche Bank dom- regional league tables for debt, equity and inates banking and with the consolidation M&A. Of these, Russia’s VTB Capital is Best Bank of Postbank now complete – in February the only player based in the region. Best Investment Bank Deutsche accumulated 93.7% of the voting Over the past year, VTB Capital opened Best Debt House rights in Postbank, giving it access to the an office in Sofia to serve the wider Balkans Best Equity House retail deposit base – it commands the big- region, and appointed Ozan Ozkural as Deutsche Bank gest private-sector retail bank in Germany, director for Turkey. These are perhaps signs with 24 million private clients and €260 of things to come. For now, though, the billion of retail deposits. international banks have far wider regional In investment banking, Deutsche Bank geographic spread. Buoyed up by Germany’s safe haven status, dominated too. JPMorgan is one of the four with the German banking sector has arguably In the past year, the bank has extended top-10 positions in each category. How- benefited handsomely from the govern- its lead in the country and ranked top in ever, Deutsche Bank has a clear lead over ment’s super-low borrowing costs and fees, with income of €273 million, taking JPMorgan in each category league table. healthy inflow of retail deposits in the past a market share of 15.1% – 1.4 points Deutsche has a solid foothold in the main year. higher than last year and over €100 million countries for investment banking, which With 10-year and 30-year Bund yields more in fee income than its closest rival, last year meant Poland and above all Rus- at record lows and the government selling JPMorgan. sia. But Deutsche generated deal flow in two-year bonds with zero coupons, this Deutsche led the pack once again in debt the other investment banking markets too, has, in turn, translated into lower funding and equity capital markets. from Hungary and Slovakia to Turkey and costs for German banks – many of which From Allianz’s €2 billion 30-year non- beyond. are seemingly flush with liquidity. call 10-year subordinated bond – the In debt capital markets, Deutsche’s deals Deposits in Germany rose 4.4% to €2.17 largest subordinated bond issue since the ranged from Russia’s seminal $7 billion trillion at the end of April from a year ear- 2008 crisis – to BSH Bosch’s groundbreak- triple-tranche bond in March to the first lier, according to European Central Bank ing Rmb2 billion ($314.4 million) multi- international bond from Azerbaijan large figures, while deposits in Spain, Greece and tranche CNH deal, and HeidelbergCe- enough for inclusion in global indices (a Ireland shrank 6.5% to €1.2 trillion in the ment’s SFr150 million ($158.7 million) $500 million five-year bond for the state same period. of high-yield bonds, Deutsche proved oil company). Deutsche also acted on However, while German banks are its strength in execution and diversity in Romania’s first dollar bond, a $1.5 billion experiencing inflows, further supplementing DCM. 10-year deal in January (the latter’s success more than €1 trillion of liquidity from the Similarly strong in ECM, where it allowed a $750 million tap in March). ECB, acute concerns remain about whether commanded a market share of over 20%, Deutsche Bank was involved with or not they can withstand further shocks Deutsche was involved in the big deals of many of the largest equity deals from the from the eurozone crisis. the year including the largest equity-linked region. Its equity markets performance was In June, rating agency Moody’s down- transaction since 2002 for Siemens, Com- particularly strong in Russia. In M&A, graded six German banks – Commerzbank, merzbank’s €11 billion capital increase and it advised on one of the biggest deals of DZ Bank, NordLB, LBBW, Helaba and Porsche’s €5 billion rights issue – the largest the year in Turkey: the $1.6 billion sale of the German unit of UniCredit – on such capital increase in the European automotive local healthcare provider Acibadem to the concerns, although it deferred judgement sector since 1980. Malaysian sovereign wealth fund.

Reprinted from Euromoney July 2012 www.db.com Awards

Deutsche advised on Sberbank’s takeover of local investment bank Troika Dialog. It Poland REGIONAL AWARDS also advised on Sberbank’s acquisition of Best M&A house the central and eastern European operations Deutsche Bank of Austria’s Volksbank, and Raiffeisen’s NORDICS AND BALTICS purchase of the Polish unit of Greece’s EFG Eurobank. Its work on such deals has led to its being appointed recently to advise on the Deutsche Bank easily topped the league BEST INVESTMENT BANK sale of the emerging Europe operations of tables for M&A thanks to its involvement BEST DEBT HOUSE Austrian banking group Alpe Adria. as one of only two global coordinators – DEUTSCHE BANK But perhaps most impressive is the part along with Crédit Agricole – on the biggest that Deutsche played in the $5.4 billion deal of last year, the Z18.1 billion ($5.4 leveraged buyout of Polish mobile operator billion) leveraged buyout of mobile operator Polkomtel by local entrepreneur Zygmunt Polkomtel by Polish entrepreneur Zygmunt Capitalizing on the investment it has Solorz-Zak. Solorz-Zak. made in the Nordic and Baltic markets dur- Deutsche was the only bank to act on all The German house also acted as adviser ing the past couple of years, Deutsche Bank’s elements of the deal, Europe’s biggest lever- to Vattenfall on the disposal of its Polish investment banking franchise is today a aged buyout since the financial crisis. It assets, comprising the Z4.6 billion sale of force to be reckoned with in the region. advised on the acquisition, underwrote the electricity supplier GZE to Tauron and the The German bank not only ranked first loan financing, and arranged the placement Z3 billion acquisition of the Swedish firm’s by investment banking fee income in the of a 25% stake in Solorz-Zak’s television Warsaw-based heat-and-power business past year, but also commanded leading firm, Cyfrowy Polsat, the proceeds of which by PGNiG. As well as a handful of smaller positions by the value of deals it executed were used to part-finance the acquisition. deals, Deutsche is also one of five banks ad- in debt and equity capital markets, mergers It also provided currency and interest rate vising Santander on its purchase of Kredyt and acquisitions, as well as loans, according hedges and arranged the high-yield bond Bank from KBC. to Dealogic. that replaced the loan. In achieving this, Deutsche is arguably the Deutsche Bank stands out in risk only international investment bank to hold advisory, however. Take commodities, Russia a commanding position in each of these four where it executed a number of innovative markets, enabling it to capture market share Best equity house risk-management products. One example Deutsche Bank and increase client penetration and coverage. is the local-currency gas-hedging products Deutsche’s commitment to expanding Deutsche introduced in the region. The its presence in Stockholm and Copenhagen ability to hedge effectively against simul- has undoubtedly supported its advance, and taneous risks in both currency and energy Deutsche Bank continues to be a strong the same commitment to the region will be prices is increasingly important for energy player in Russia and nowhere is this more critical in retaining clients and entrenching companies in the region in the context evident than in the equity markets, where it the franchise. of the eurozone crisis and accompanying acted on landmark transactions in inter- Based on the investment bank’s per- exchange-rate volatility, and given Iranian national and local markets across various formance this year, and the growth and threats to close the Strait of Hormuz. sectors in the period. development it has shown in recent years, As another illustration of Deutsche’s Deutsche Bank was senior bookrunner Deutsche Bank takes the investment bank risk advisory business, the bank helped a on the $1.4 billion IPO in New York of award. company with large export earnings hedge Yandex, a Russian internet company, for ex- For its performance in debt capital mar- against the rouble strengthening to the ample. It also arranged a $534 million IPO kets, where it fought off stiff competition dollar. Deutsche made the currency forward in London for port operator Global Ports, from local rivals Nordea and Danske Bank rate affordable, despite concerns about one of Euromoney’s deals of the year. to clinch the top position in the bookrun- the Russian economy, by making the deal Deutsche Bank was joint global coor- ner league tables, Deutsche Bank wins that expire once a pre-agreed level of profit dinator on a $491 million capital increase award too. had been made. It also embedded a feature for Polymetal, a Russian gold and silver Across the corporate, supranational/sover- limiting mark-to-market losses in the case producer. It was also joint coordinator on eign/agency/regional and financial institu- of rouble weakening. the $808 million IPO of Nomos Bank, the tion sectors, Deutsche showed its strength Finally, Deutsche was particularly active largest Russian bank IPO since the global in execution and distribution, printing 61 in developing principal-protected index- financial crisis. international bonds for issuers, worth a linked products for regional corporates combined €11.7 billion, giving a market with excess cash: a situation in which many share of 7.9%. found themselves, particularly in Russia, Among the stand-out deals were Statoil’s thanks to the high commodity prices. $1.75 billion five-, 10- and 30-year financing

www.db.com Reprinted from Euromoney July 2012 in November – the largest ever yankee bond SAUDI ARABIA by a Nordic issuer – and Sweden’s inaugural REGIONAL AWARDS 144a US dollar bond. Best investment bank Equally notable, Deutsche printed Deutsche Bank Estonian energy company Elering’s debut MIDDLE EAST Eurobond, as well as an £800 million ($1.24 billion) dual-tranche offering – the first dual- tranche financing in sterling by a Nordic BEST RISK Adviser In investment banking, HSBC Saudi issuer – for Handelsbanken, and the only DEUTSCHE BANK Arabia (of which SABB owns 51%) has insurance capital transaction of the year long held the title of best investment bank from IF Insurance. in Saudi Arabia. It remains a market leader. But others have been building profitable Last year’s winner in risk management, investment banks over the past five years – DENMARK HSBC, has taken innovative steps to meet above all Deutsche Bank. that demand over the course of the year. In terms of profitability, Deutsche Bank’s Best Investment BANK It launched an Energy Solutions Group to Middle East franchise as a whole had a Deutsche Bank help clients manage their energy exposures record year in 2011 and a record quarter in and has been involved in deals including a the first three months of 2012. Meanwhile, seven-year Shariah-compliant dollar-Indo- profits from its Saudi franchise doubled Using its recently established branch nesian rupee call spread for a Saudi client over the year, surpassing even the UAE in Copenhagen to mount an assault on and a Shariah-compliant cross-currency as the bank’s most profitable market – a the Danish investment banking market, reverse repo transaction with a Qatari dramatic turnaround from the situation five Deutsche Bank’s efforts have been rewarded Islamic institution. years ago. with a strong performance in the past year Standard Chartered can also point to a At the core of Deutsche Bank’s profit- across ECM and M&A. number of notable deals, including a $200 ability in Saudi Arabia are hedging and This on-the-ground presence enabled million, 10-year dollar-ringgit cross-curren- structured-finance products – areas that the bank to develop close relationships cy swap for a company in the UAE. have grown in line with the increasing with the country’s leading institutions and, However, it is Deutsche Bank that has sophistication of Saudi corporates, many as a result, helped secure a string of key impressed the most. It has extended repo of which are the region’s biggest in their mandates such as sole financial adviser to financing to dozens of banks and asset sector. Danisco on its €5 billion sale to DuPont – managers on collateral that many others in In the first half of 2011, Deutsche Bank the largest M&A transaction in Denmark the region would have shied away from. It set up a fully fledged platform for sales and during the awards period. Another standout has also developed solutions that enabled structuring and trading in fixed income, advisory role was acting as sell-side adviser clients to raise large amounts of capital currency and commodities in Riyadh. to AP Møller-Mærsk on its €1.3 billion sale against assets that local lenders would not Among the core trades that Deutsche Bank of Mærsk Liquefied Natural Gas to Teekay accept. executed last year was a $750 million four- LNG and Marubeni Corporation. Among the key deals it has been involved year dollar-riyal cross-currency swap for a In Danish ECM, Deutsche was involved in were providing $750 million of hedges local client, one of the biggest ever cross- in the one deal that dominated the market: to a Saudi company, arranging the first currency swaps in the region. Danske Bank’s DKr20 billion rights issue Shariah-compliant enhanced repo for a Deutsche Bank was one of the banks, in 2011 – the second-largest Danish equity Gulf bank and arranging $50 million of along with HSBC, behind the $1.2 billion raise ever and the second-largest Nordic three-year debt for a Kuwaiti group backed financing for Axis, a subsidiary of Saudi FIG equity raise. Deutsche’s performance by its equity holdings. It also helped a Telecom. This was awarded Euromoney’s in DCM was markedly weaker, but rivals Lebanese client raise more debt than was Islamic finance deal of the year. should expect that to be corrected as it available in the local loan market for a Late last year, Deutsche Bank also helped continues to build out its Nordic investment buyout of a regional insurance group by arrange the region’s first-ever project sukuk banking business. identifying trapped cash and assets held by for Saudi Aramco’s refinery joint venture the company’s subsidiaries. with France’s Total. This SR3.75 billion ($1 billion) deal was also the world’s first sukuk for a greenfield project.

Reprinted from Euromoney July 2012 www.db.com Awards

It was also active in the export credit market, arranging over €380 million of REGIONAL AWARDS financing for Angolan projects alone in 2011, for example. Deutsche boasts a 200-plus team in AFRICA South Africa and a more modest presence in Nigeria. Crucially, it has not cut back on BEST INVESTMENT BANK staff in recent years. It has also expanded its DEUTSCHE BANK commodities capabilities, recently winning its first oil-hedging mandate from the Ghanaian government. The bank also deserves credit in its capacity as the top international invest- ment bank in Nigeria by fee income, and In investment banking, notwithstand- second, overall, during the award period. ing the relative decoupling of Africa’s real Notable hits for Deutsche include working economy, the problems in Athens over the as lead financial adviser on Nigeria’s banking past year has managed to infect the conti- sector clean-up mission as well as a bookrun- nent’s capital markets. Nevertheless, despite ner on the sovereign Eurobond. Still, the bat- febrile market sentiment, capital outflows tle between investment banks in Africa will and modest deal flow, global investment only get fiercer, so Deutsche cannot afford to banks have stepped up their presence in the rest on its laurels. region, eyeing lucrative opportunities in the years ahead if Africa’s macroeconomic outperformance translates into capital SOUTH AFRICA market gains. Best EQUITY house Over the past year, Deutsche Bank has qui- Deutsche Bank etly but surely snapped up lucrative business in the teeth of surprisingly strong competi- tion from local and global houses. Deutsche was the top investment bank in Africa by In equity capital markets, Deutsche fee income in the awards period, generating Bank wins for the number as well as size $45.3 million with a 15.5% market share, of deals, relative to its competitors. First, in comfortably ahead of Goldman Sachs’s $17.2 July, Deutsche was bookrunner on a R1.8 million. billion capital increase via an accelerated Deutsche advised on some 17 M&A deals bookbuild for Growthpoint, part of the during the award period and played a key financing for the acquisition of the V&A role as joint financial adviser in the largest waterfront in Cape Town. African M&A deal over the past year: Wal- In its biggest deal, in September, it was Mart’s epoch-making R16.5 billion ($1.96 lead adviser to Grindrod, a South African billion) acquisition of South African retailer shipping firm, on a R2 billion block trade Massmart, which was finally wrapped up in to finance the expansion of a port in Ma- May 2011. puto, Mozambique. In October, the bank Deutsche Bank did landmark ECM trades was bookrunner on a R795 million deal for for South African issuers, including the largest property firm Hyprop. Finally, in Decem- block trade, at R2 billion, for shipping and ber, it was sole bookrunner on a R1 billion freight firm Grindrod, and the largest acceler- share placement by Exxaro, a local mining ated bookbuild as the sole bookrunner for a company. R1.8 billion capital increase for Growthpoint Properties, the largest property firm on the Johannesburg Stock Exchange.

www.db.com Reprinted from Euromoney July 2012 For more information, please contact a member of our team: Deutsche Bank

Corporate Banking & Securities Tel: +44 207 545 0259 www.db.com Deutsche Bank db.com

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