Italy is strategic for Deutsche Bank in the growing market of family-owned SMEs with international vocation
«International Private Bank is strategic in Deutsche Bank and Italy is by far the most strategic», says Claudio de Sanctis, Head of the new unit, in an interview with IlSole24Ore
di Isabella Bufacchi
5' di lettura
«The International Private Bank, which brings together private wealth management and corporate businesses, is strategic in Deutsche Bank and Italy is by far the most important single market, the most strategic of them all, the biggest in the bank I am responsible for», said Claudio de Sanctis in an exclusive interview with IlSole24Ore.
Claudio de Sanctis is a €262 billion CEO responsible for 3.4 million private, wealth and commercial clients at Deutsche bank. Last June he was appointed CEO EMEA and Head of the International Private Bank (IPB), a new unit created by combining Wealth Management with €206 billion in assets under management and Private & Commercial Business International units with €56 billion, making a total of €262 billion in assets under management. IPB is one of the four pillars of the far reaching transformation and restructuring plan launched by the CEO Christian Sewing back in July 2019.
«IPB has to contribute in an important way to the 2022 targets of the group in revenues, cost cutting, RoE and profitability. And in doing so I will be aiming at the Italian family owned SMEs which are my first client: they represent a business that has been growing for the past two years and I believe will continue to grow for the next three, five years», said de Sanctis.
Why did DB decide to combine Wealth Management and Private & Commercial Business International (PCBI) in one single unit?
We want to exploit the synergies of these two business areas, which often overlap. Wealth management is aimed at portfolios over €5 million, and in some exceptional cases wealth over €2 million. And PCBI had to do with everything that you can define as “retail”, that is branches, family officers, private banking for portfolios up to €5 million in Italy and in Spain. We decided to put together these two businesses to be able to talk to our clients with a unified team. This is one of Deutsche Bank's strengths: we are able to offer entrepreneurs who own SMEs the whole range of products and services that are needed to run a company – for example capital markets, loans, treasury, real estate, export finance – by using our global network in corporate and investment banking. At the same time, we are also able to manage the personal wealth of SME entrepreneurs, from real estate to financial portfolios. I feel quite confident that Deutsche Bank is the number one in Europe in this line of business. And I repeat, Italy is by far the most important market for IPB.
So, given that Italy is so important, which are your plans for Italy?
Our business in Italy, which since June has been under the responsibility of our country manager Roberto Parazzini, is like Germany and Spain in the sense that it is a market where family-owned SMEs with an international aspect are the pulsing heart of the economy and at the same time they are the core business of Deutsche Bank. In IPB, Italy is the biggest market and, being Italian, this makes me particularly proud. And I add that Italy's importance is here to stay in IPB, and get stronger. Given that Italy is so strategic for Deutsche Bank, this means that I will invest for sure in the Italian market to keep our profitability growing. I believe our business has enormous potential in so-called “family enterprises”. We can bring value added as we can satisfy the needs of Italian family-owned small SMEs. We aim at becoming in Italy what we are in Germany, the first point of contact for this type of client. As I see the world of finance developing, I think this particular market has among the biggest growth potential of all. The revenues in IPB now are €3 billion: I intend to increase this.
You are Italian. You worked 10 years in London, 10 years in Zurich and less than two years ago you left Credit Suisse to joint Deutsche Bank, a very German bank. Why did you decide to leave CS for DB?
Deutsche Bank has very strong German roots, however it is most of all a European bank and this is the main reason why I am here now, at Deutsche Bank. I strongly believe in the European project that Christian Sewing is pursuing, that is, making Deutsche Bank into a European champion. And this means that we aim to give to our European companies what they look for and find today in US banks.
Soon after you entered Deutsche Bank, Manfred Knof left. He was the Head of private banking in Germany and now he is CEO of Commerzbank. Competition is getting tough! Is it true that DB is hiring aggressively, in spite of an aggressive cost cutting programme?
Manfred is a very good banker and I wish him all the best. I am very happy about the way our hiring programme is going. In the last 18 months we have been able to recruit skilled financial experts, at very senior level. We can attract talent, and the best of all where we are strong ourselves and that is private banking and wealth management for SMEs. We hired quite a lot in Italy but also in Spain. This new hiring will be financed by a reduction in costs that will come from synergies, cuts in duplication and in activities which are no longer strategic or profitable. I do not have unlimited resources. The target for cost reduction in IPB is €200 million, as presented last December by Sewing in his restructuring plan.
How will IPB capture the rising savings and deposits that are skyrocketing during this pandemic? Investors and savers are getting more and more worried and prudent.
It is reasonable that in this moment, in the middle of a severe recession and in this very deep Covid crisis, there would be less risk appetite. And this goes hand in hand with a secular trend which is moving towards more conservative yields. For now, we have registered flows of investments at the same level as our best quarters. Last spring, well before the start of the pandemic, we prepared a new investment product which is extremely simple, and which now is responding very well to our clients' increasing needs: it is called Strategic Asset Allocation, and it is a wealth management tool investing in passive funds. In this way we have dramatically lowered the management fees (0.50%-0.60% is the total expense ratio), which are about one third of what you can find in the market. This product invests in macro areas to catch macro trends: we must be able to give our clients capital gains while keeping their risk and management fees as low as possible.
Are there clients who still expect total capital guarantee instruments?
Well, for our most sophisticated clients we offer an additional protection even if we do not guarantee 100% their capital invested: it costs 0.10% and it reduces the impact of a loss from a violent fall (10% or 20%) in equity markets.
Negative rates, historically low yields are big challenges. Yet Deutsche Bank has to face another challenge, that is money laundering, which is one of the darkest pages in the 150-year history of Deutsche Bank. What are you doing about it, especially in wealth management?
Deutsche Bank made mistakes in the past and now we are putting things right. We have invested heavily in IT to strengthen our data processing systems to make them more transparent, and that is extended to all the transactions carried out by our clients, imagine what a huge amount of data. However I am convinced that the best way to stop money laundering is through our corporate culture, that is, we must hire personnel with the right values and ethics. This is the best defence against money laundering.