The clear message from Deutsche Bank to European businesses borrowing from US lenders is that they will be dropped when circumstances are difficult.
The warning, which was outlined in an interview with board member Fabrizio Campelli of Deutsche Bank, is the most recent escalation in a struggle with US banks for the patronage of European businesses on its own soil.
It occurs as the largest lender in Germany’s corporate banking division is experiencing a resurgence as it nears the conclusion of a protracted restructuring.
Without giving any specific instances, he said: “A lot of European corporates are already realizing the risks of not engaging with companies who are long-term dedicated to the geographies… in which they operate.”
Campelli, who is in charge of both the investment bank and the corporate section of Deutsche, said US banks “tend to flex lending up and down depending on conditions.”
Again without providing any specific examples, he continued, “There was evidence of non-German banks in this country pulling lending off the table while German banks were going longer credit during the pandemic, in 2020.
According to statistics from Dealogic, the five biggest US banks last year—JPMorgan, Bank of America, Morgan Stanley, Goldman Sachs, and Citigroup—took home a combined 35% share of the revenue from loans made to German companies, up from 18% a decade earlier.
Christian Sewing, the CEO of Deutsche Bank, has issued a warning over the “danger” of Europe’s reliance on foreign banks, equating the threat to the area’s reliance on outsiders for energy.
While Deutsche Bank has always emphasized the necessity for Europe to have powerful banks to compete with US and Chinese rivals, the most recent rhetoric indicates a more combative tone.
In order to support European banks, Campelli urged politicians and regulators to take a “concerted approach.”
In 2019, Deutsche started a transformation with the goal of moving away from its erratic investment bank and toward its more conservative operations that cater to businesses and consumers.
After years of failure to fulfill that promise, the tide is now changing, helped along by rising interest rates. Although conflict, skyrocketing prices, and energy expenses are casting a shadow over the future, higher borrowing costs are fattening earnings from conventional banking.
Campelli, who had previously been in charge of the renovation, stated, “We’re now getting there.” Did we depend on the investment bank more in 2020–21 than we had anticipated? Yes. A considerably more balanced mix of earnings is emerging.
US banks disagree with the remarks. One of the biggest banks in Germany today, JPMorgan, claims to be committed.
When asked about resistance to JPMorgan’s expansion in Germany, Stefan Behr, head of the bank’s operations in Europe, told reporters that “many of the German banks cooperate with us on projects as well as us being a banking partner to them.”
For every transaction, there is competition. Just like we’re not happy if we lose a mandate, I’m sure they’re not happy when they don’t get it either,” Behr added.
According to Stefan Hafke, head of Citigroup’s German operations, the company’s clientele in Germany consists of “extremely long-term, durable connections.”
He argued against being a purely US bank and stated that he wanted strong European banks in Germany. He declared, “We are competing on an equal footing with everyone else.”
Goldman declined to comment despite a recent increase in employment there. A request for comment from Morgan Stanley did not receive a prompt response.
There is no pullback, according to a Bank of America spokesperson, who also stressed that Germany is crucial to the company’s strategy.
