Whenever things go wrong in any company, sooner or later fingers will point accusingly at its culture.
Deutsche Bank is no exception. Despite a recent pop in the share price following a rare positive earnings warning, it is certainly true that a lot has recently gone wrong for my old employer.
It is extremely difficult to pin down a single culture within Deutsche Bank. It is still, despite the recent job losses, a mighty big place – over 90,000 employees based all over the world. Retail banking in Germany has very different constraints and pressures than investment banking in London.
When I first arrived at Deutsche in 1999, after years at the American bank Bankers Trust (which Deutsche had recently bought) the ‘feel’ of DB’s investment bank was, at first contact, not so different from what I was used to.
There was the same kaleidoscopic mix of nationalities speaking in various accents of fluent or broken English; the same feeling of urgency to do deals; the same male-dominated gender mix.
True, there were little differences. Bankers Trust was an exceptionally scruffily dressed bank. Bankers’ CEO Charlie Sanford had cared little for fripperies that did not enhance the bottom line. Deutsche’s i-bank on the other hand, led by the always immaculately dressed (and soon to be late) Edson Mitchell, was considerably sleeker.
The first big difference I encountered was one of scale. In the first month of my time at DB another ex-Bankers colleague and I cooked up a rather neat Euro-based FX hedging idea. We communicated it to the bank’s enormous European corporate sales force and sat back waiting for bites. For weeks there was nothing.
And then deals started coming. At first there were just a few, then dozens upon dozens of transactions poured in until we had done billions of Euros of notional. Eventually we had to turn off the pipe before we were overwhelmed.
This was emblematic of the way the bulk of Deutsche – the ‘German’, corporation-serving bit – operated. Slow at first, then, if things worked out, with unstoppable momentum.
This Germanic slowness also had its downside. It was a constant source of friction. Dealing with the retail bank or the private wealth arm was like wading through a swimming pool of sticky ooze. The committees that we investment bankers had to present to were uniformly polite but the delays in getting decisions from them were often interminable.
The really notable thing, however, were the rifts in the investment bank. - Not referring to the constant low-grade bickering between sales and trading. At Deutsche Bank it was more serious.
The investment bank had been set up in a hurry post-1995. Its various departments had been assembled almost from scratch. Probably because of this, the culture of each was different.
Maybe it was as a result of the different nationality mixes in each team? FX (where I worked) was populated very heavily with Aussies, Kiwis, South Africans and Brits.
Away from FX though, it was different. The Equities team, especially equity derivatives, was like a little France. Rates had a slightly Italian tinge. Emerging Markets was Russian and Turkish. And so on.
Each team also developed its own way of doing things. FX was very heavily focused on dealing technology. Emerging took a lot of prop risk. Rates was all about structured products.
This wouldn’t have mattered if the departments had worked together amicably. That was far from being the case. Each product ‘silo’ developed its own systems. Each silo competed to get the sales force (which was, in theory ‘non-aligned’ with any product) to get the bank’s customers to trade its products rather than those of its rivals. There was a presumption of loyalty to your silo that felt almost tribal.
And when there was a debate about who should be doing what product there was always a fierce and unrelenting maelstrom of internal competition. For example: who should be doing long-dated FX options, Rates or FX? Who should do mortgages?
Sales debates were, if anything even more intense.
Attempts were made to dial this competition back but, in my experience, the impetus for this came from the wearied businesses themselves rather than being imposed from above. For instance, there was a document written in quasi-legalese that attempted to demarcate who should do what when it came to long-dated FX. The heads of Rates and of FX had signed it as if it was the banking equivalent of the SALT II agreement.
Thus it was not for nothing that Deutsche, even at the peak of its success, got a reputation on the street as an extraordinarily ‘political’ place to work. When the money was rolling in, this wasn’t considered to be a problem. Years later, it raises two important questions.
First, has this culture remained in place? I’ve not been at the bank for four years but old colleagues tell me life’s the same only with more boxes to tick.
Second, does it really matter? In my view, yes. I think that there is no doubt that an ingrained culture of fragmentation and internal competition has been a major factor in Deutsche’s recent discomfort.
For one thing, costs will inevitably be too high if there are multiple rival and duplicate computer systems (a state of affairs that led the previous head of IT to call Deutsche ‘the most dysfunctional’ place she’s ever worked).
Also, making hard calls on what businesses to dial back on and which to invest in becomes a torrid shouting fest if each silo fights to protect its turf like a Mafia family. Result? Costly inertia.
And this problem is even more intense if it takes place in the context of a decades-old culture of distrust between the big divisions.
Deutsche still employs a huge number of extremely talented people despite some recent departures, but it faces a long, hard road to recovery. That road will be shorter and easier if those extremely talented people can learn to work together as teammates, not rivals. That is the overriding challenge facing CEO Sewing and his colleagues.
I live in hope.
Kevin Rodgers started his career as a trader in 1990 with Merrill Lynch in London before joining another American bank, Bankers Trust. From there he went on to work as a managing director of Deutsche Bank for 15 years, latterly as global head of foreign exchange. His book, “Why Aren’t They Shouting?: A Banker’s Tale of Change, Computers and Perpetual Crisis” was published by Penguin Random House in July 2016.
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