Deutsche Bank counting on investment bank hiring spree to pay off

Deutsche Bank is counting on an aggressive hiring spree that has added more than 100 investment bankers in the past 18 months to start powering revenues and cut its reliance on bond trading.

Since the start of 2023, Germany’s largest lender has recruited 125 investment bankers, including from Credit Suisse, with 75 joining at managing director or director level. Deutsche’s purchase of UK broker Numis, completed in October, brought in a further 300 staff.

The decision to increase the ranks of its investment bankers marks a reversal of Deutsche’s strategy since the financial crisis, a period during which the bank largely scaled back the business to save costs and expanded other parts of the lender.

It also comes amid a burgeoning recovery in global mergers and acquisitions after a prolonged drought. Deutsche was seventh in the league table for investment banking fees in the first quarter, up from 11th for the whole of 2023 and ninth in 2022, according to data provider Dealogic.

Fabrizio Campelli, head of Deutsche’s corporate and investment bank, told the Financial Times that the lender was aiming to offset its volatile and capital-intensive fixed-income trading business by expanding its corporate finance advisory arm.

Alongside working on acquisitions, the business advises companies on raising new debt and equity, as well as initial public offerings.

“We’re not looking to go back to being a top five bank globally, across all the bulge bracket firms — this is more about choosing our spots strategically and winning in those,” he said.

Campelli said its extensive recruitment had raised the number of “revenue-generating bankers” in its corporate finance advisory business by up to 25 per cent. He is hoping the hiring will lead to a similar increase in the investment bank’s advisory revenues over time.

“We expect to see over time a corresponding uplift in performance compared to pre-2023 levels,” he added.

While the investment bank’s performance has improved in recent years, the upswing has depended on its bond trading business. A powerhouse for Deutsche, it accounted for more than 80 per cent of the investment bank’s revenues last year. 

In 2023, the lender’s corporate finance and M&A bankers generated €1.25bn in revenue. While the revenues were up 26 per cent on 2022’s levels, they still accounted for less than 5 per cent of Deutsche’s total revenue in 2023.

Campelli, who has led Deutsche’s investment bank since 2021, said the investment in staff was already paying off. Revenues at its corporate finance advisory arm climbed 54 per cent in the first quarter from the same period a year earlier.

Among the bank’s key hires over the past 18 months are Alison Harding-Jones, who joined from Citigroup as global head of M&A; former Lazard banker Ken Oliver Fritz, who is now vice chair of Emea of origination and advisory; and William Mansfield, who is head of M&A for Emea and was previously at Credit Suisse. 

The hires are part of a broader ambition that Deutsche set out last year to diversify the investment bank’s revenues away from bond trading.

Despite culling between 3 and 4 per cent of its lowest performers each year at the investment bank, the business now has 4,800 front office staff, up from a low of 4,200 in the wake of a restructuring in 2020 by chief executive Christian Sewing.

“We attracted talent from firms that we couldn’t have attracted five years ago, partly because the market was too tight and partly because the brand of DB six years ago wasn’t where it is now,” said Mark Fedorcik, co-head of investment banking at Deutsche.

“They want to come here now. They’ve seen the stock double in the last five years.”

The bank has also drafted in senior dealmakers to advise financial institutions, consumer and financial groups, technology companies and healthcare businesses. In addition, it hired leaders for its Asia-Pacific and Latin American businesses as well as in equity capital markets.

Fedorcik defended Deutsche’s £410mn acquisition of Numis after the bank paid a 72 per cent premium for the broker to expand in the UK. In February, Deutsche booked a €233mn writedown on the business.

While some staff have left Numis since the takeover, Fedorcik said it had won more clients than it had lost, adding the likes of Coca-Cola Europacific, Land Securities Group and Airtel Africa.

“The UK market fee pool for the past three or four months has been mixed,” Fedorcik said. “But this was a strategic acquisition focused on the long term over the next two to three plus years, not the first few months.”