| Type | Aktiengesellschaft |
|---|---|
| Traded as | FWB: DBK, NYSE: DB |
| Industry | Financial services |
| Founded | 1870 |
| Headquarters | Frankfurt am Main, Germany |
| Area served | Worldwide |
| Key people | Josef Ackermann (CEO and chairman of the management board), Clemens Börsig (Chairman of the supervisory board) |
| Products | Investment, commercial, retail and private banking, asset management |
| Revenue | €28.57 billion (2010)[1] |
| Profit | €2.310 billion (2010)[1] |
| Total assets | €1.906 trillion (end 2010)[1] |
| Total equity | €49.2 billion (end 2010)[1] |
| Employees | 102,060 (FTE, end 2010)[1] |
| Website | www.db.com |
Deutsche Bank AG (literally "German Bank"; pronounced [ˈdɔʏtʃə ˈbaŋk]) is a global banking and financial services company with its headquarters in Frankfurt, Germany. It employs more than 100,000 people in over 70 countries, and has a large presence in Europe, the Americas, Asia Pacific and the emerging markets. Deutsche Bank is the largest foreign exchange dealer in the world with a market share of 21 percent.[2]
Deutsche Bank has offices in major financial centers including New York, London, Frankfurt, Paris, Moscow, Amsterdam, Dublin, Toronto, São Paulo, Singapore, Hong Kong, Tokyo, Sydney, Dubai, Riyadh and Mumbai.
The bank offers financial products and services for corporate and institutional clients along with private and business clients. Services include sales, trading, research and origination of debt and equity; mergers and acquisitions (M&A); risk management products, such as derivatives, corporate finance, wealth management, retail banking, fund management, and transaction banking.[3]
Deutsche Bank’s Chief Executive Officer and Chairman of the Group Executive Committee is Josef Ackermann since May 2002. He agreed at the end of 2009 to continue as chief executive of Deutsche Bank for another three years until 2013.[4] On July 26, 2011, along with its second quarter earnings report, Deutsche Bank reported that Anshu Jain, head of investment banking and Jürgen Fitschen, head of the German business, will replace Josef Ackermann as co-CEOs starting next year.[5] Fears that Deutsche Bank could neglect its German roots and expand risk-taking activities prompted key members of the supervisory board to opt for the dual CEO model.[6] Deutsche Bank is listed on both the Frankfurt (FWB) and New York stock exchanges (NYSE).
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Deutsche Bank was founded in Berlin in 1870 as a specialist bank for foreign trade.[7] The bank's statute was adopted on 22 January 1870, and on 10 March 1870 the Prussian government granted it a banking license. The statute laid great stress on foreign business: "The object of the company is to transact banking business of all kinds, in particular to promote and facilitate trade relations between Germany, other European countries and overseas markets."[8]
The bank's first domestic branches, inaugurated in 1871 and 1872, were opened in Bremen[9] and Hamburg.[10] Its first foray overseas came shortly afterwards, in Shanghai[11] (1872) and London[12] (1873). Already, at this early stage, the bank was looking further afield, making investments in North and South America, Asia, and Turkey.
Major projects in the early years of the bank included the Northern Pacific Railroad in the US[13] and the Baghdad Railway[14] (1888). In Germany, the bank was instrumental in the financing of bond offerings of steel company Krupp (1879) and introduced the chemical company Bayer to the Berlin stock market.
Deutsche Bank's early decades were a period of rapid expansion. Issuing business began to grow in importance in the 1880s, and in the 1890s it really took off. The bank played a major part in the development of Germany's electrical-engineering industry, but it also gained a strong foothold in iron and steel. A solid base in Germany permitted the financing of business abroad, which in some cases kept the bank occupied for years, the best-known example being the Baghdad Railway.
The second half of the 1890s saw the beginning of a new period of expansion at Deutsche Bank. The bank formed alliances with large regional banks, giving itself an entrée into Germany's main industrial regions. Joint ventures were symptomatic of the concentration then under way in the German banking industry. For Deutsche Bank, domestic branches of its own were still something of a rarity at the time; the Frankfurt branch[15] dated from 1886 and the Munich branch from 1892, while further branches were established in Dresden and Leipzig[16] in 1901.
In addition, the bank rapidly perceived the value of specialist institutions for the promotion of foreign business. Gentle pressure from the Foreign Ministry played a part in the establishment of Deutsche Ueberseeische Bank[17] in 1886 and the stake taken in the newly established Deutsch-Asiatische Bank[18] three years later, but the success of those companies in showed that their existence made sound commercial sense.
When in spring 1914 the "Frankfurter Zeitung" told its readers that Deutsche Bank was "the biggest bank in the world",Frankfurter Zeitung, Erstes Morgenblatt, 5 March 1914. The claim marked the highpoint but at the same time the end of an era. During World War I, the source of the visionary vigor that had driven many a determined company to succeed gradually dried up.
The immediate postwar period was a time of liquidations. Having already lost most of its foreign assets, Deutsche Bank was obliged to sell other holdings. A great deal of energy went into shoring up what had been achieved. But there was new business, too, some of which was to have an impact for a long time to come. The bank played a significant role in the establishment of the film production company, UFA, and the merger of Daimler and Benz.
The bank merged with other local banks in 1929 to create Deutsche Bank und DiscontoGesellschaft, at that point the biggest ever merger in German banking history. Increasing costs were one reason for the merger. Another was the trend towards concentration throughout the industry in the 1920s. The merger came at just the right time to help counteract the emerging world economic and banking crisis. In 1937, the company name changed back to Deutsche Bank.
The crisis was, in terms of its political impact, the most disastrous economic event of the century. The shortage of liquidity that paralyzed the banks was fuelled by a combination of short-term foreign debt and borrowers no longer able to pay their debts, while the inflexibility of the state exacerbated the situation. For German banks, the crisis in the industry was a watershed. A return to circumstances that might in some ways have been considered reminiscent of the "golden age" before World War I was ruled out for many years.
After Adolf Hitler came to power, instituting the Third Reich, Deutsche Bank dismissed its three Jewish board members in 1933. In subsequent years Deutsche Bank took part in the aryanization of Jewish-owned businesses: according to its own historians, the bank was involved in 363 such confiscations by November 1938.[19] During the war, Deutsche Bank incorporated other banks that fell into German hands during the occupation of Eastern Europe. Deutsche provided banking facilities for the Gestapo and loaned the funds used to build the Auschwitz camp and the nearby IG Farben facilities. Deutsche Bank revealed its involvement in Auschwitz in February 1999.[20] In December 1999 Deutsche, along with other major German companies, contributed to a $5.2 billion compensation fund following lawsuits brought by Holocaust survivors.[21][22] The history of Deutsche Bank during the Second World War has been documented by independent historians commissioned by the Bank.[19]
During World War II, Deutsche Bank became responsible for managing the Bohemian Union Bank in Prague, with branches in the Protectorate and in Slovakia, the Bankverein in Yugoslavia (which has now been divided into two financial corporations, one in Serbia and one in Croatia), the Albert de Barry Bank in Amsterdam, the National Bank of Greece in Athens, the Creditanstalt-Bankverein in Austria and Hungary, the Deutsch-Bulgarische Kreditbank in Bulgaria, and Banca Commercial Romana in Bucharest. It also maintained a branch in Istanbul, Turkey.
Following Germany's defeat in World War II, the Allied authorities, in 1948, ordered Deutsche Bank's break-up into ten regional banks. These 10 regional banks were later consolidated into three major banks in 1952: Norddeutsche Bank AG; Süddeutsche Bank AG; and Rheinisch-Westfälische Bank AG. In 1957, these three banks merged to form Deutsche Bank AG with its headquarters in Frankfurt.
In 1959, the bank entered retail banking by introducing small personal loans. In the 1970s, the bank pushed ahead with international expansion, opening new offices in new locations, such as Milan (1977), Moscow, London, Paris and Tokyo. In the 1980s, this continued when the bank paid US$603 million in 1986 to acquire Banca d’America e d’Italia, the Italian subsidiary that Bank of America had established in 1922 when it acquired Banca dell'Italia Meridionale. The acquisition represented the first time Deutsche Bank had acquired a sizeable branch network in another European country.
In 1989, the first steps towards creating a significant investment-banking presence were taken with the acquisition of Morgan Grenfell, a UK-based investment bank. By the mid-1990s, the build up of a capital-markets operation had got under way with the arrival of a number of high-profile figures from major competitors. Ten years after the acquisition of Morgan Grenfell, the U.S. firm Bankers Trust was added.
Deutsche continued to build up its presence in Italy with the acquisition in 1993 of Banca Popolare di Lecco from Banca Popolare di Novara for about US$476 million.
In October 2001, Deutsche Bank was listed on the New York Stock Exchange (NYSE). This was the first NYSE listing after interruption due to 9/11. The following year, Deutsche Bank strengthened its U.S. presence when it purchased Scudder Investments. Meanwhile, in Europe, Deutsche Bank increased its private-banking business by acquiring Rued Blass & Cie (2002) and the Russian investment bank United Financial Group (2006). In Germany, further acquisitions of Norisbank, Berliner Bank and Postbank strengthened Deutsche Bank’s retail offering in its home market. This series of acquisitions was closely aligned with the bank’s strategy of bolt-on acquisitions in preference to so-called “transformational” mergers. These formed part of an overall growth strategy that also targeted a sustainable 25% return on equity, something the bank achieved in 2005.
From as late as 2001 to at least 2007, the Bank engaged in covert espionage on its critics. The bank has admitted to episodes of spying in 2001 and 2007 directed by its corporate security department, although characterizing them as "isolated."[23] According to the Wall Street Journal's page one report, Deutsche Bank had prepared a list of names of 20 people who it wished investigated for criticism of the bank, including Michael Bohndorf (an activist investor in the bank) and Leo Kirch (a former media executive in litigation with bank).[23] Also targeted was the Munich law firm of Bub Gauweiler & Partner, which represents Kirch. According to the Wall Street Journal, the bank's legal department was involved in the scheme along with its corporate security department.[23] The bank has since hired Cleary Gottlieb Steen & Hamilton, a New York law firm, to investigate the incidents on its behalf. The Cleary firm has concluded its investigation and submitted its report, which however has not been made public.[23] According to the Wall Street Journal, the Cleary firm uncovered a plan by which Deutsche Bank was to infiltrate the Bub Gauweiler firm by having a bank "mole" hired as an intern at the Bub Gauweiler firm. The plan was allegedly cancelled after the intern was hired but before she started work.[23] Peter Gauweiler, a principal at the targeted law firm, was quoted as saying "I expect the appropriate authorities including state prosecutors and the bank's oversight agencies will conduct a full investigation."[23]
In May 2009 Deutsche Bank informed the public that the executive management learned about possible violations which occurred in past years of the bank's internal procedures or legal requirements in connection with activities involving the bank's corporate security department. Deutsche Bank immediately retained the law firm Cleary Gottlieb Steen & Hamilton in Frankfurt to conduct an independent investigation[24] and informed the German Federal Financial Supervisory Authority (BaFin). The principal findings by the law firm, published in July 2009,[25] are as follows: Four incidents that raise legal issues such as data protection or privacy concerns have been identified. In all incidents, the activities arose out of certain mandates performed by external service providers on behalf of the Bank's Corporate Security Department. The incidents were isolated and no systemic misbehaviour has been found. And there is no indication that present members of the Management Board have been involved in any activity that raise legal issues or have had any knowledge of such activities.[25] This has been confirmed by the Public Prosecutor’s Office in Frankfurt in October 2009.[26] Deutsche Bank has informed all persons affected by the aforementioned activities and expressed its sincere regrets. BaFin found deficiencies in operations within Deutsche Bank’s security unit in Germany but found no systemic misconduct by the bank.[27] The Bank has initiated steps to strengthen controls for the mandating of external service providers by its Corporate Security Department and their activities.[25]
Deutsche Bank was one of the major drivers of the CDO market during the housing credit bubble from 2004–2008, creating ~$32,000,000,000 worth. The 2011 US Senate Permanent Select Committee on Investigations report on Wall Street and the Financial Crisis analyzed Deutsche Bank as a 'case study' of investment banking involvement in the mortgage bubble, CDO market, credit crunch, and recession. It concluded that even as the market was collapsing in 2007, and its top global CDO trader was deriding the CDO market and betting against some of the mortgage bonds in its CDOs, Deutsche bank continued to churn out bad CDO products to investors.[28]
The report focused on one CDO, Gemstone VII, made largely of mortgages from Long Beach, Fremont, and New Century, all notorious subprime lenders. Deutsche Bank put risky assets into the CDO, like ACE 2006-HE1 M10, which its own traders thought was a bad bond. It also put in some mortgage bonds that its own mortgage department had created but couldn't sell, from the DBALT 2006 series. The CDO was then aggressively marketed as a good product, with most of it being described as having A level ratings. By 2009 the entire CDO was almost worthless and the investors (including Deutsche Bank itself) had lost most of their money.[28]
Gregg Lippman, head of global CDO trading, was betting against the CDO market, with approval of management, even as Deutsche was continuing to churn out product. He was a large character in Michael Lewis' "The Big Short", which detailed his efforts to find 'shorts' to buy Credit Default Swaps for the construction of Synthetic CDOs. He was one of the first traders to foresee the bubble in the CDO market as well as the tremendous potential that CDS offered in this. As portrayed in the book "The Big Short" of Michael Lewis, Lipmann in the mid of the CDO and MBS frenzy was orchestrating presentations to investors, demonstrating his bearish view of the market, offering them the idea to start buying CDS, especially to AIG in order to profit from the forthcoming collapse. As regards the Gemstone VII deal, even as Deutsche was creating and selling it to investors, Lippman emailed colleagues that it 'blew', and he called parts of it 'crap' and 'pigs' and advised some of his clients to bet against the mortgage securities it was made of. Lippman called the CDO market a 'ponzi scheme', but also tried to conceal some of his views from certain other parties because the bank was trying to sell the products he was calling 'crap'. Lippman's group made money off of these bets, even as Deutsche overall lost money on the CDO market.[28]
Deutsche was also involved with Magnetar Capital in creating its first Orion CDO. Deutsche had its own group of bad CDOs called START. It worked with Elliot Advisers on one of them; Elliot bet against the CDO even as Deutsche sold parts of the CDO to investors as good investments. Deutsche also worked with John Paulson, of the Goldman Sachs Abacus CDO controversy, to create some START CDOs. Deutsche lost money on START, as it did on Gemstone.[28]
| Year | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 |
|---|---|---|---|---|---|---|---|
| Net Income | €5.0bn | €-3.9bn | €6.5bn | €6.1bn | €3.5bn | €2.5bn | €1.4bn |
| Revenues | €28.0bn | €13.5bn | €30.7bn | €28.5bn | €25.6bn | €21.9bn | €21.3bn |
| Return on Equity | 18% | 29% | 30% | 26% | 16% | 1% | 7% |
| Dividend | 0.75 | 0.5 | 4.5 | 4.0 | 2.5 | 1.7 | 1.5 |
Deutsche Bank has been transformed over the past five years, moving from a German-centric organisation that was renowned for its retail and commercial presence to a global investment bank that is less reliant on its traditional markets for its profitability.
The bank has been widely recognized for this change and was named International Financing Review's Bank of the Year twice in a three year period, in 2003 and 2005. It has also won the prize in 2010.
For the 2008 financial year, Deutsche Bank reported its first annual loss in five decades., despite receiving billions of dollars from its insurance arrangements with AIG, including $11.8bn from funds provided by US taxpayers to bail out AIG.[29]
October 2011: Based on a preliminary estimation from the European Banking Authority (EBA), Deutsche Bank AG needs to raise capital about 1.2 billion euros ($1.7 billion) as part of a required 9 percent core Tier 1 ratio after sovereign debt writedown starting in mid-2012.[30]
Until recently, there was no CEO at Deutsche Bank. The board was represented by a “speaker of the board.” Today, Deutsche Bank has a Management Board whose members are: Josef Ackermann (Chairman and CEO); Hugo Bänziger (Chief Risk Officer); Anshu Jain (Corporate and Investment Banking); Jürgen Fitschen (Regional Management); Rainer Neske (Private & Business Clients); Hermann-Josef Lamberti (Chief Operating Officer) and Stefan Krause (Chief Financial Officer).
The Group Executive Committee is the Management Board plus the heads of the bank’s other business areas, namely: Kevin Parker (Asset Management); and Pierre de Weck (Private Wealth Management).
The Supervisory Board of the bank is chaired by Clemens Börsig.
Deutsche Bank’s mission statement is: “We compete to be the leading global provider of financial solutions, creating lasting value for our clients, our shareholders, our people and the communities in which we operate” The bank’s business model rests on two pillars: the Corporate & Investment Bank (CIB) and Private Clients & Asset Management (PCAM).
In little over a decade, Deutsche Bank’s Corporate and Investment Bank (CIB) has established itself as one of the world’s leading investment banking houses. CIB comprises the bank’s market-leading Global Markets and Global Banking Divisions.
Until recently, Global Markets contributed a major slice of Deutsche Bank’s profitability and revenues. The business sells and trades debt and equity, derivatives, and other innovative products. Global Markets’ prowess in bond markets, foreign exchange and derivatives has brought many awards and accolades over the past five years.
However, from 2004/5 Deutsche Bank embarked on a programme of cost reduction, initially axing 6,400 jobs in London, Frankfurt and elsewhere.[31] In November 2008, acting in response to the credit crisis, the Bank announced a further staff reduction, axing 1 in 7 of its traders, a loss of 900 jobs, mainly in London and New York.[32]
Global Banking comprises a major Merger & Acquisitions (M&A) practice that has grown significantly over the past five years. In 2007, the bank’s M&A business, in competition with banks and institutions with long-standing and well-established M&A reputations, made further strides in building a world-class franchise. Global Banking also includes a global capital markets business that has a significant and innovative presence in the European initial public offering, equity, debt and high-yield markets. Coverage of clients is also housed in Global Banking.
Global Transaction Banking, which forms part of Global Banking, deals with cash management, clearing, trade finance and trust & securities services. This business has grown fivefold in recent years and as of 2010 has become an industry leader. Deutsche Bank has won numerous awards for the quality of its transaction banking service, especially in the area of cash management. It is now one of the largest divisions of the Bank ranked by IBIT.
CIB’s clients are mainly private and public sector institutions, including sovereign states, supranational bodies, global and multinational companies and medium-sized and small businesses.
Private Clients & Asset Management (PCAM) is composed of Private Wealth Management, Private & Business Clients and Asset Management. This trio of business divisions include Deutsche Bank’s investment management business for private and institutional clients, together with retail banking activities for private clients and small and medium-sized businesses.
Private Wealth Management functions as the bank’s private banking arm, serving high net worth individuals and families worldwide. The division has a strong presence in the world's private banking hotspots, including Switzerland, Luxembourg, the Channel Islands, the Caymans and Dubai.
Early understanding of modern communication tools has contributed to create the international recognition Deutsche Bank enjoys As of 2010[update]. In 1972 the bank created the world-known blue logo "Slash in a Square" - designed by Anton Stankowski and intended to represent growth within a risk-controlled framework.[33]
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