Deutsche Bank braces for trading downturn as competitors pull out during IPO as business in Hong Kong and mainland China picks up

Deutsche Bank is ramping up its focus on its China operations to take advantage of the hole created by the exit of its investment banking rival, the world’s second-largest economy is struggling with the coronavirus pandemic, the head of the Asia-Pacific region said. The government is betting that the recovery after the pandemic will continue to gain momentum.

The bank, which first opened in China in Shanghai in 1872, seven years after HSBC, has strengthened its corporate finance arm and increased its presence in debt and equity capital markets over the past two years amid weak trading. It’s here. Companies raised capital and sold shares as Goldman Sachs and Morgan Stanley cut jobs and peers such as Credit Suisse went bankrupt.

“We are aware that many of our competitors are reducing capacity in this business, including in Hong Kong,” Asia Pacific CEO Alexander von zur Muehlen said in an interview in Hong Kong. ” “This gives us a unique opportunity to operate strategically in a kind of countercyclical manner.”

UBS is reportedly considering cutting 90 jobs across its private and investment banking divisions in Asia, primarily China, Hong Kong, Taiwan and Singapore. Bank of America announced in January that it would cut about 20 jobs in Asia, primarily affecting Hong Kong-based bankers and people involved in business with China.

Mr. von zur Meulen, who is based in Singapore, said that sooner or later mainland Chinese businesses will recover and Deutsche Bank wants to be poised to seize that moment.

Hong Kong bankers have a lot of free time and are worried about weak trading and a surge in layoffs

According to its annual report, Deutsche Bank had 844 people based in Hong Kong in 2021, up from 851 people last year. In mainland China, the number of employees increased from 553 in 2021 to 634 in 2023.

However, both markets had contrasting performances during the two years of the pandemic. Pre-tax profit fell to 74 million euros ($78.7 million) from 121 million euros in Hong Kong. In mainland China, profits jumped from 89 million euros to 131 million euros.

Mr. von zur Muehlen emphasized the importance of our 152-year history of doing business in China, especially in times of geopolitical uncertainty, and noted some of the issues currently facing the market. He added that it should not be taken away.

There will always be a need for capital as China continues to open up and promote greater international use of the renminbi, he added. This creates an opportunity for Deutsche Bank to boost its cross-border activities from Hong Kong.

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Paul Chan persuades Middle Eastern companies to visit Hong Kong in 2023 to explore listing opportunities

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“Hong Kong has a unique position, serving as China’s financial window to the world, both inbound and outbound,” he said.

Last month, China set a growth target of around 5% for 2024, after economic growth accelerated to 5.2% in 2023 from 3% a year earlier. He noted that despite setbacks due to weak consumption and high savings rates, there are also many areas of the economy that are booming.

Top sectors that are attractive to investors include electric vehicles, renewable energy, technology and innovation. Currently, China’s weak currency is benefiting export-oriented industries.

“We need to understand and accept the fact that China will not grow at the 9% or 10% growth rate that it has been experiencing for decades,” he said. “There are many countries in the world that would be happy if they could achieve 5% growth.”

Deutsche Bank is positive about the prospects for inbound investment from the Middle East to China, particularly from sovereign wealth funds in the region, said von zur Muehlen, who has also been responsible for overseeing Germany and the Europe, Middle East and Africa region since last year. It is said that

Why people are at the heart of Deutsche Bank’s success in China and Asia Pacific

Deutsche Bank expects more deals between China and the Middle East, adding that the pipeline is growing. Investors in the Middle East are striving to diversify. They see China as a very strong and still growing economy.

The bank was recently one of the advisors on a record US$8.6 billion deal led by private equity firm PAG and the shopping mall division of Chinese real estate giant Dalian Wanda. This was the largest direct inbound investment from the Middle East to date.

“While many stock markets in the Western Hemisphere are trading at all-time highs, we have seen the prices of many assets devalued,” he said. “At this time, [Hong Kong] The market is starting to look attractive. ”

He said there would need to be a period of “stability and calm in political, economic and real estate market dynamics, not just in China” before investments move from the pipeline to solid deals. That would make both Hong Kong and mainland China assets more attractive to investors, he added.

“China will definitely come back. We are here for the long game.” “I was never worried about Hong Kong from the beginning,” von zur Muehlen said. “People always say negative things, but [but] There’s no reason. Business can always be better. The past few years have been very quiet. But we are seeing good signs. ”