Deutsche Bank has for the first time jumped ahead of the undisputed equity warrants leader, Citigroup, in its share of the German market and has laid out its next challenge: to be number one in Switzerland. "We won't be happy with being number two or number three," said Johan Groothaert, managing director and global head of structured products, sales and origination in London. Three years ago, Yassine Bouhara, managing director and global head of structured and flow derivatives at Deutsche Bank in London, told DW the firm's goal was to knock Citigroup out of its top spot (DW, 4/27/99). "We have climbed our Mount Everest," Groothaert said. However, Deutsche Bank still concedes that Citibank is the number one warrants house globally.
Part of the reason Deutsche Bank has been able to topple Citigroup is the recent decision by the U.S. bulge bracket firm to combine its institutional equity structured derivatives group in London with its retail equity business in Frankfurt. The firm is in the process of moving the retail group to London. "When you centralize, it is easy to lose your focus," said one banker. A recruiter said the combination has made business more difficult, but attributed Deutsche Banks' rise in market share to its mandate to target retail clients through its strong branch network.
Another factor in Citigroup's fall from the number one spot is the firm has lost some good derivatives professionals since its decision to combine the groups, said a person familiar with the situation. Christoph Rüther, who was a co-head of the warrants business, responsible for Asia-Pacific and the Americas, went to German broker-dealer Euwax Broker in March to be a member of the board of management and eventually take over as ceo. Rüther declined comment. Frank Langer, managing director in European flow derivatives trading at Deutsche Bank in Frankfurt, who came over from Citibank last year with three traders (DW, 5/7/01), said he feels it is necessary to be based in Germany since it is the center of retail equity trading in Europe. "It is difficult to keep a focus on the retail base, once you are part of a big institutional group," he added, pointing out that Citi's move to combine the two groups has added to the difficulty of maintaining market share.
Jim Neave, head of trading in the warrants business and Citigroup board member, disagreed, saying that the move was positive and would not affect the firm's market share in Germany--particularly because its distribution business would remain there. He said the combination of the groups instead offered advantages. For example, access to the structured group's wholesale sales channel would allow the retail group to sell its certificates through more than retail channels, he said.
