Internationalization of Deutsche Bank

Introduction Deutsche Bank, an international universal bank, was internationally active a short time after its foundation. The bank’s early decades were a period of rapid expansion. With its growth Deutsche Bank seemed to be unstoppable. But with the beginning of the First and Second World War the vision to offer a financial services throughout the world was destroyed. Fortunately, the year of 1957 has the status of a second birthday of Deutsche Bank. From this day on, after its reconstruction, the bank becomes active in retail banking by introducing small loans.

After reentering the international banking market between the 1970s mid 1980s Deutsche Bank followed a new global strategy to set up its branch network world wideby the end of the 1980s: The expansion of the retailmarket and the presence of investment banking. Due to its continous growth Deutsche Bank has become a leading global investment bank. With 80,849 employees and a presence in over 70countries, it offers financial services throughout the world. [1] 1. The Beginning Of Deutsche Bank The Early Years

As Deutsche Bank was founded in 1870 as a specialist bank for foreign trade in Berlin, its purpose was”to transact banking business of all kinds, in particular to promote and facilitate trade relations between Germany, other European countries, and overseas markets”. [2] In the early years they offered foreign trade payment of all kinds (to grant advance payments for export and importers reimbursement credits) to the merchants. Following the opening of branches in seaside towns Bremen and Hamburg its first foreign branches were set up shortly afterwards in Shanghai a London in 1882/83.

The objective of the branch in London was primarily to be a key contact for German trading companies and secondarily to establish the German currency as a recognized means of payment. This step was very important because London was at that time the most important international trading port. Therefore the London bureau became the most important foreign branch until its closure on the outbreak of the First World War in 1914. Deutsche Bank’s early decades were a period of rapid expansion.

Several acquisitions e. g. of the Berliner Bankverein and Deutsche Union-Bank in 1876 resulted in Deutsche Bank’s position as the biggest bank in the German empire. In 1886 the Deutsche-Ubersee Bank was founded as a subsidiary of Deutsche Bank with its headquarter in Berlin. This was a step in order to develop activities in the increasing lucratice south-american market. They tried to give up the strategy to capture the international market slowly with own branches and thought about a new way: The control of the oversea market through subsidiaries.

With participations of Deutsch-Asiatische Bank in 1889 they tried to enter the Asian market again. However, due to the price decrease of silver and financial years full of losses Deutsche Bank felt the necessity to close the branches in Asia. The bank’s principal activity was trade financing. It also played an outstanding role in the underwriting of bonds for the Chinese government and in the financing of railway construction in China. The Main Focus On Fixing And Expansion The end of the 19th century was the beginning of a new period of expansion of Deutsche Bank.

Up to this point the bank concentrated in foreign trade financing, industrial financing and emissions. However, the presence of Deutsche Bank on the German market was missing. Domestic branches of its own existed only in Bremen, Hamburg and Frankfurt. Due to this fact Deutsche Bank changed their strategy. They wanted to strengthen their presence in the German market. Therefore the bank began to establish branches in Munich, Dresden, Leipzig followed by further branches in Nuremberg and Augsburg. From this time on the bank began to form alliances with large local banks, e. g.

the takeover of 75% of Bergisch-Markischen Bank or Schlesischen Bankvereins through stockswaps in 1897. This was followed by further participations for example Hannoverschen Bank or the shareholding of Essener Credit-Anstalt in 1903. The large numbers of participations helped to strenghten Deutsche Bank’s position by taking influence of the regional banks. In 1914 Deutsche Bank rethought their strategy once again. As the banks biggest competitors, Dresdner Bank and Diskonto-Gesellschaft had, at that time, a great network of branches in Germany they wanted to establish their presence with their own name.

Following the merger of Deutsche Bank and Bergisch-Markischen Bank in 1914 and Norddeutschen Creditanstalt and Bergisch-Markischen Bank in 1917 Deutsche Bank became the biggest universal bank in the world with roughly 40 branch offices. Over the next years many mergers, participations and stock swaps followed. In 1929 The biggest ever merger in German banking history creates the “Deutsche Bank und Disconto-Gesellschaft”. The concentration throughout the industry and the increasing costs were the main reasons for this merger.

Due to this strategy Deutsche Bank was able to establish a branch network all over Germany. This merger increased the number of branches to roughly 300 branch offices. [3] 2. Reconstruction Due to First And Second World War Unfortunately, the First and Second World Wars destroyed Deutsch Bank’s branch network and business activities. The WWI resulted also in the closure of the bank’s branch in London, which was the most important foreign office for Deutsche Bank. Without this branch they had no longer access to international transactions.

Because of WWII the bank broke up in ten regional banks in 1948. This ten regional banks were later consolitated into three major banks . Finally on May 2, 1957 the bank’s second birthday took place. All three regional banks were re-united to form Deutsche Bank AG with its headquarter in Frankfurt. 3. Internationalization After its reconstruction, Deutsche Bank came back to life. By introducing small personal loans in 1959 the bank entered retail banking. This was the first step of Deutsche Bank retail banking due to an appeal to the former minister of economic Ludwig Erhard.

Over the years, these small loans developed into a national and international successful division. Next to the retail banking they cooperated with correspondent banks and representative offices in the 1960s until the mid 1970s. With its entry in international banking markets in the 1970s and until 1985 Deutsche Bank followed a new global strategy by setting up its world wide branch network. New agencies in e. g. London, Moscow, Paris and Tokyo were opened. With the Acquisition of Banca d’America e d’Italiana in 1986 it owned a sizeable branch network in another European country.

Also the The expansion of branches in 12 more countries in the Asian Pacific region succeeded. The banks new created blue logo “Slash in a Square” which represents “signaling growth in a stable environment” fits to the new growth strategy. [4] 4. Becoming A Global Player Investment Banking Presence By the end of the 1990s Deutsche Bank thought about a new strategy due to the fact that the normal branch business was less profitable. Therefore Deutsche Bank took main focus on the corporate business, financial transactions and investment business.

The growth in capital market was primarily accomplished in two major events: The acquisition of Morgan Grenfell in 1989 and Bankers Trust in 1998. These acquisitions allowed Deutsche Bank to show a significant investment-banking presence and to strenghen its position in this segment. The expansion of investment business continued in the following years with the Russian investment bank United Financial Group in 2006 and strengthening of its U. S. presence when it purchased Scudder Investments. Expansion Of Retail Business Increasing its German market share was a permanent issue for Deutsche Bank in the 1990s.

It unsuccessfully negotiated a merger with domestic competitor Dresdner Bank in 1999, failing to agree on integrating their investment banking activities. Finally the restructuring of domestic operations had to be done alone since they realized that private banking is also a very profitable field of business. Deutsche Bank created “Deutsche Bank 24”. This new retail banking unit was a successor of Bank 24 which was founded in 1995 and only offered a limited product range via telephone and internet. Deutsche Bank 24 now combined retail and direct banking activities and at the beginning they serviced more than 6,8 m.

clients. In 2002, Deutsche Bank 24, Private Banking, parts of Corporate Banking, and the online broker Maxblue are combined under the umbrella of the Deutsche Bank brand name in the new corporate division “Private & Business Clients”. In Europe, Deutsche Bank increased its private-banking business by acquiring Rued Blass & Cie in 2002. The acquisitions of Noris Bank and Berliner Bank in 2006 and 2007 strengthened Deutsche Bank’s retail services in its home market. In 2007 Deutsche Bank launches private & business banking in China and in 2008 the bank acquiries a stake of 29. 75% of Postbank.

Due to the financial crisis and the resulting change in the capital market, the bank need to adapt their strategy and therefore launch “Phase 4” of their Management Agenda. It comprises the key pillars for example to increase profitability and the quality of earnings in the Corporate and Investment Bank, they focuse on privat clients and Asia as a key driver of revenue growth. 5. Conclusion Deutsche Bank experienced since its foundation both ups and downs in their development. Due to the the First and Second Worl War the bank lost a lot what they had built up – even their name.

However, they overcame this difficult period and grew slowly to a leading providor of financial solutions worldwide. Especially the recent financial crisis was a heavy blow. However, the turbulence on the financial markets, were solved without state aid. This shows how strong Deutsche Bank really is. Also the continous adaption of their strategy led them to success. Nowadays Deutsche Bank seemed to be be on the right way. With its focus on investment banking and retail business the bank has become a a significant bank. So the vision to become one of the world’s leading financial institutions, finally come true.

With its second best quarter result in 2010 Deutsche Bank is on a good and successful way. Table of Reference Deutsche Bank – At a Glance. URL: http://www. deutsche-bank. de/en/media/DB_at_a_Glance_2009. pdf (Status 1. 6. 2010) Historical Association of Deutsche Bank – Milestones. URL:http://www. bankgeschichte. de/e/index_03. html (Status 1. 6. 2010) Historical Association of Deutsche Bank – Filialen. URL:http://www. bankgeschichte. de/index_02_04. html (Status 1. 6. 2010) Deutsche Bank – New Brand and Visual Identity. URL: http://www. db. com/en/content/company/new_brand_and_visual_identity. htm (Status 1. 6. 2010) [pic]

[1] Deutsche Bank at a Glance URL: http://www. deutsche-bank. de/en/media/DB_at_a_Glance_2009. pdf (pages visited in 1. 6. 2010 [2] Historical Association of Deutsche Bank – Milestones. URL:http://www. bankgeschichte. de/e/index_03. html (pages visited on 1. 6. 20010) [3] Historical Association of Deutsche Bank – Filialen URL:http://www. bankgeschichte. de/index_02_04. html [4] Deutsche Bank – New Brand and Visual Identity URL: http://www. db. com/en/content/company/new_brand_and_visual_identity. htm (pages visited on 1. 6. 2010) – |Term Paper |Internationalization of deutsche bank |