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Ravi Raju, Deutsche Bank's head of asset and wealth Management, Asia Pacific, is pitching for a chunk of the money the bank will invest in several divisions. Photo: Edmond So

Deutsche's Asia asset arm pitching for share of bank's €1.5bn investment

The mainland market to play major role in hitting growth targets set by Deutsche Bank's asset and wealth management division

Don Weinland

Ravi Raju, the head of Deutsche Bank's asset and wealth management arm in Asia, has just weeks to formulate a pitch for a chunk of the €1.5 billion (HK$12.9 billion) the bank plans to invest into several divisions of its global operations.

The investment, aimed at boosting digitisation and the headcount of managers who deal with the ultra-wealthy, is part of a revamp to areas of the bank announced late last month in a five-year strategic plan. The final iteration, including the amount of investment that divisions and geographies take home, will be finalised by late July.

Raju reckons the demand for investments in Europe by some of China's state players, as well as upcoming breakthroughs in China's capital markets, will help give his operations a claim to a healthy heap of the cash.

"MSCI is going to include China in its global weighting," he noted as an example of how regulatory changes in China will drive opportunities for the bank.

Reports this month say China stocks could be included in the index, which aggregates top stocks from dozens of countries, as soon as June.

"Once that happens, anyone who runs money with institutional and private banking customers, or even retail customers, would like to have an exposure into China. That's going to become pretty huge."

Raju was on the right side of Europe's biggest investment bank when it released a new strategy based largely on cost-cutting set to carry it through the next half decade to its 150th anniversary. The wrong side of the bank was its investment and retail banking divisions, which took massive cuts instead of a promised boost in cash.

The investment banking business will look to reduce its assets by between €130 billion and €150 billion as a cost-controlling measure. Retail banking plans to divest in Postbank, which has more than 1,000 branches. The bank posted a profit of €438 million for the last quarter of 2014 after notching up a €1.4 billion loss for the same period in 2013.

The new strategy will push Deutsche's asset and wealth management division to grow in assets by 5 to 10 per cent a year with the help of 15 per cent year-on-year growth in ultra-high net-worth relationship managers.

In Asia, that job will fall to Raju, and the mainland China market will play a major role in hitting those targets.

International clients looking to buy into yuan-denominated bonds can, for example, tap the Chinese market via Harvest Fund Management, the mainland's second-largest asset manager by assets, in which Deutsche holds a 30 per cent stake. For wealth management, partnerships such as the one with Harvest were only set to grow as China's capital markets become increasingly connected to the global financial system.

The asset manager also wants a greater share of China's government business from regulators such as the State Administration of Foreign Exchange (SAFE), which holds trillions of US dollars, some of which Deutsche already manages.

"They are certainly looking at more international investments because the domestic market is not big enough compared to what is coming in, in terms of the pool of money, in the insurance sector or in pension funds," Raju said of some of his state clients such as SAFE and China Investment Corp. "There's a clear requirement for them to go international."

Deutsche Bank's asset management business in Asia may also take some cuts. The division sold off its asset management business in the Philippines early last year. Despite being profitable, consolidation in the country's domestic market would have eventually pushed the business into irrelevancy, Raju said.

Staying relevant and maintaining a long-term dominant role in regional markets will be a deciding factor for whether more businesses are cut loose as others add staff.

"We are continuing to look at what's happening in the market place," Raju said. "If we think that we can't be a scale player, a top five, in one of those businesses then we are going to start to look at selling them."

This article appeared in the South China Morning Post print edition as: Deutsche Asia vying for its share
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