The market constant
The 'four Cs' keep Deutsche at the top of the sovereign, supranational and agency game, according to Jo Richards.
That Deutsche Bank is a market leader in the euro sovereign, supranational and agency business is no surprise — it has been at the forefront of the sector since the euro came into being in 2000. But where the bank is streets ahead of its European rivals is in the dollar market where it not only wins mandates from the European SSAs, but has also carved out a niche with the government sponsored entities, particularly the Federal Home Loan Banks for which Deutsche has ranked among the top three banks providing debt financing in 2005.
Deutsche also offers its issuing clients an impressive array of currencies, 17 to date, bringing deals in sectors as diverse as Mexican pesos to Icelandic krónor, a facility its rivals lack.
Deutsche has dominated the SSA league tables for much of this decade, rarely slipping from its number one position and in the period under review, January 1, 2005 to May 31, 2006, it has occupied the top slot with a market share of almost 10%, beating its closest rivals JP Morgan and Merrill Lynch by a margin of almost 3%.
According to Bill Northfield, co-head of frequent borrower DCM in London, the bank's success is due to a long history of commitment to the market, expertise in all parts of the curve, a strong derivatives platform and the ability to deliver emerging market currencies as well as G3 currencies — a structure Deutsche calls the 'four Cs'.
The bank also has a substantial balance sheet committed to the business, a key requirement for both issuers and investors. It is also one of only two banks to be a primary dealer for every core European sovereign.
Whichever way you slice leagues tables, Deutsche is there or thereabouts. It is number one, for example, in the long end of the euro curve with an impressive list of ground-breaking euro deals under its belt, including the first ever 50 year bond for Agence France Trésor and 30 year issues for Spain, Greece, Italy, Belgium and Portugal, which Ralph Berlowitz, head of frequent borrower syndicate, attributes to Deutsche's long end government trading desk being the best on the Street. "We are also the leading swap house for that part of the curve," he says. "These trading and derivative capabilities have helped us take the leading role in primary."
Top deals in the last 18 months for the SSA team are the two transactions for Germany — the inaugural $5bn five year dollar global issued in June 2005 and the borrower's first inflation-linked bond, a Eu5.5bn 10 year launched in March 2006.
"These were fantastic mandates to win," says Berlowitz, "and we won them because of our capabilities, not because we are Deutsche Bank."
And to highlight the diverse nature of their clients, the team points to the Eu750m 10 year deal for Israel.
"We lead managed Israel's return to the euro market after an absence of three years and priced Eu750m of 10 year bonds 7bp tighter than initial price talk on the back of orders in excess of Eu4bn," says David Shasha, co-head of DCM. "The borrower has now mandated us for their dollar global along with Morgan Stanley, which we hope to bring after the summer."
Deutsche recognises that there are challenges to come with the market undergoing a period of extreme volatility and competition becoming ever more fierce. "It will be a challenge to defend market share while at the same time trying to keep revenues stable," says Berlowitz. "We continually seek to adapt to market changes and want to be at the forefront of innovation. But we have a successful model, so why should we change it?"
|Key staff: Ralph Berlowitz (head of frequent borrower syndicate), Bill Northfield (co-head frequent borrower DCM), David Shasha (co-head frequent borrower DCM), Ralf Buschman (German coverage), Jean-Marie Generis (US syndicate, agencies and global frequent borrowers)|
Key hires in past 12 months: David Stephenson, frequent borrower coverage, London
Best deal of 2006: Federal Republic of Germany Eu5.5bn 10 year inflation linked bond launched March 2006
Head count: Coverage 19; syndicate 8; trading 44; institutional client group sales 570
League table positions, 2001-2005:
1, 1, 1, 2, 1