Deutsche Bank to cut Europe branches as it refocuses on wealthy clients

Deutsche Bank is planning a broader consolidation of its vast network of Italian and Spanish retail branches in favour of a smaller number of flagship locations catering to richer clients.

The lender is moving away from covering the needs of all retail clients in those countries to instead focus on serving those with enough money to invest and who want more sophisticated investments and loans, said Claudio de Sanctis, who oversees Deutsche Bank’s retail business outside Germany. The restructuring is starting in Spain, followed by Italy and eventually Belgium, with plans to service affluent clients in the rest of Europe mainly through digital banking services.

“It is a fantastic funnel” for the bank’s wealth management, Mr de Sanctis said in an interview in his office in Zurich. If “you have the strategy of doing affluent, you end up doing a massive amount of high net worth and ultra high net worth”.

The retail operations in the two Mediterranean countries, where Deutsche Bank used to have almost 700 branches combined, have long been a headache because of the cost of running a physical network for a traditionally low-margin business, particularly with interest rates depressed. Mr De Sanctis, who joined Deutsche Bank in 2018 from Credit Suisse Group and also oversees its wealth management business, has vowed to grow revenue at his unit by about 10 per cent by the end of next year, while taking out €300 million in costs.

To get there, he’s also taking a page from his former employer. A second prong of his turnaround strategy is to increase co-operation between his wealth management staff and bankers for family-owned companies, in an effort to win mandates from wealthy business owners to also manage their personal assets. The strategy, labelled Bank for Entrepreneurs, is already in place in Italy, being rolled out in Spain, and the bank plans to target Belgium next.

“Particularly in Europe, these family entrepreneurs don’t really separate in their mind private and the company,” he said. “It’s just one picture.”

The firm also plans to trim its offerings for people who have less money to invest than millionaires or even billionaires and who are unable to generate the kinds of profit margins a wealth manager would like to see on certain products. Many just need a few specific services such as an asset allocation strategy, mortgages, or Lombard loans, he said.

Deutsche Bank’s retail operations in Belgium, India, Italy and Spain were added to Mr de Sanctis’s responsibilities last year. He now leads a division known as International Private Bank that comprises the bank’s entire wealth management business globally as well as the retail operations outside of Germany. The addition almost doubled the quarterly revenue overseen by Mr de Sanctis to roughly €750m, which has increased to about €800m per quarter in 2021.

Deutsche Bank still has 158 branches in Spain, down from 170 branches. In Italy it has already reduced its branches to 266 from 500, after branches were closed in the last three years and the sale of its Italian network of financial advisers to Zurich Insurance Group as part of Mr de Sanctis’ effort to focus the business.

The new strategy in Italy has resulted in significant hiring of client-facing staff. The lender has recruited 22 staff to look after the lender’s ultra-high net worth clients.

It unsuccessfully tried to sell the units in Spain and India a few years ago but abandoned the plans over lack of interest among buyers, Bloomberg has reported. India remains a “long-term optionality” given its status as the second-most populous country in the world, Mr de Sanctis said.