All the major cash management banks are facing increasing pressures on their global cash management networks due to increasing regulatory demands, and the economies of the Emerging Markets have problems world-wide, e.g. China’s faster than expect deceleration combined with the impact of reduced demand for commodities, and problems in South American economies. So it is no surprise that the leading cash management banks have reviewed the viability of their global cash management business with RBS exiting most of their locations outside the UK, and HSBC withdrew from several countries around the world.
Deutsche Bank’s overall strategic review
Earlier in the year Deutsche Bank carried out a fundamental review of the bank’s overall strategy and focus with John Cryan, one of the new CEOs, eplaining, “We expect 2016 and 2017 to be years of hard work, burdened by the cost of making much-needed investments to strengthen the bank’s controls and to improve its efficiency, focusing our country, product and client footprints. We must re-engineer our internal processes. We must standardise our systems and procedures, decommission legacy software, standardise and enhance our data, and improve our reporting.”
He is keen to get on with it saying, “Now the plan is in place, we are done on questions about where we are going to be. We are now clear on what we want to do and it is up to all of us to get on and do it.”
GTB increased visibility and importance
In the new structure GTB has been given increased visibility and importance. Deutsche Bank have re-organised their operating divisions along client lines merging (by 1Q 2016) Corporate Finance and Global Transaction Banking into one division: Corporate and Investment Banking (CIB) headed by Jeff Urwin, who led a combined corporate, investment and transaction bank at JPMorgan up until his departure for DB this year.
GTB network rationalisation
Although the headline in the new Deutsche Bank 2020 strategy was that “Deutsche Bank is exiting 10 countries”, the reality for GTB clients is that this only affects one country - Argentina. The only other affected countries, Mexico and Uruguay had GTB staff originating business for other service locations. Corporates relying on DB in Argentina will need to transition their relationships to alternative providers. The remaining DB country exits impact other divisions of the bank.
More pain or gain?
So when we look at Deutsche Bank GTB is there more retrenchment on the horizon? Deutsche Bank are now sure that, “The comprehensive review undertaken by DB now draws a line under the exits and ensures a continuing commitment to the network as part of strategy 2020.” Indeed, Werner Steinmueller, Head of GTB believes that, “The signs are promising: Deutsche Bank has committed to investing approximately EUR 1 billion in GTB and to an additional EUR 50 billion in incremental leverage exposure.”
CTMfile take: All major cash management banks are rationalising their coverage and commitment to the business. Deutsche Bank is unusual in that not only have they only exited one country - Argentina, whilst they have also increased their commitment to the global transaction banking business.
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