Deutsche Bank here to stay in India, and grow

deutsche bank, markets, covid, citi, CEO

Deutsche Bank has had a bumpy ride ever since the Global Financial Crisis. In the past few years, it has shed businesses, restructured and changed focus. Alexander von zur Muehlen, CEO, Asia-Pacific, Deutsche Bank, in an interview with Joel Rebello and MC Govardhana Rangan says where it goes from here. Edited excerpts:

As Asia-Pacific CEO of Deutsche Bank, you have a ringside view of the region. How has Covid affected and how are they positioned?

We are undoubtedly seeing different degrees of impact across the region and certainly, India and the ASEAN are being more impacted from a Covid point of view. Nonetheless, we remain very constructive and positive on the economic trajectory from here on. Now, I know that India is presently very worrying but the economy is expected to continue to grow by 10% over this year as long as we’re not going to see any further deterioration from here on. Undoubtedly, there will be more structural implications for those with less financial firepower.

Global banks have been shrinking in the region and recently Citi said it would exit many retail businesses. Where does this end?

I can give you a very clear answer on that — we are strengthening. And it’s not just because of aspirations and what we would like to do or what I would like to do. If you take our footprint in Asia-Pacific across those 14 markets, we are and we have been profitable for a very long period and last year, Asia-Pacific has contributed the lion’s share of profitability to the group. So in a nutshell, Asia-Pacific is a market we are completely committed to and one where we will continue to grow key markets within the region, India being on top of the list.

Deutsche has been restructuring its business for many years in India. What is left to be done?

We are by and large complete in this regard. You should not expect any reductions or exits in this part of the world. The new strategy that we announced in 2019 which included the exit from cash equities, as an example, has been broadly concluded. We have got to the jump-off point from where we can expect further organic growth. We have had a very great history in India — we have a very round portfolio of activities and we are very successful.

The easy monetary policies seem to be fuelling inflationary fears now.

Certainly, inflation pressures will mount in the US and some other places as a result of the massive stimulus packages that are being put into the equation. So refinancing needs and as a consequence, the pricing of finance as a consequence has seen some steepening of the curve and we will continue to see those effects in many countries as the real refinancing task is only starting to both do healing and then ultimately provide a step-by-step stimulus.

Is the impact going to be uniform across the regions?

It’s going to be three-speed. We’re going to have Asia-Pacific with its big driving economies like India and China which are going to move — India at 10% and China which is using the brakes a little, could grow by 10% though it may be lower. The US is benefiting from its $6 trillion and growing stimulus package and as a consequence kick-starting its economy and inflation quite rapidly. Europe is going to be the third one in the equation — while stimulus packages will come, growth will be more contained.

What does the steepening of the interest rate curve mean for firms that have borrowed in US dollars?

There will be the long end and short end of the curve. Overall, given the flush of liquidity globally, we don’t see imminent risk from a refinancing point of view. There is sufficient demand for risk assets. In the coming quarters, I can see an import of capital coming towards Asia because of the differentiated growth outlook that we are going to see globally. There’s a lot of capital still looking for investment and given the somewhat dire outlook in growth opportunities in the developed world, there’s more capital influx taking place towards Asia including India.

Banks are tightening lending after the Archegos blow-up and the Greensill episode. What do these mean for flows?

Those are examples of what translates into the massive liquidity injected and inflated environment that we live in. So such cases will continue to happen but what I think it means for us as an industry is that your focus on prudent risk management must continue to be intact. You must not deviate from your underwriting standards. There will be more of those situations as more money is looking for investment opportunities and some will be routed to the wrong categories or will not be properly risk-managed.

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