Deutsche Bank hikes Asia profitability targets by half

FRANKFURT: Deutsche Bank is hiking its Asia profitability targets by half as the business benefits from an economic recovery and a global shift of money flows, Alexander von zur Muehlen, the board member responsible for the region said.

"We are aiming for 15pc return on tangible equity (RoTE) in the core bank in the region by 2022", Muehlen told Reuters in an interview published on Monday, adding that compared to 10pc this year.

Asia's economy has recovered relatively faster from the COVID-19 pandemic than Europe's with GDP expected to grow by 8pc next year, according to OECD estimates, compared to 3.6pc growth in Europe.

Deutsche Bank, like most other banks, was forced to supply liquidity to corporate customers ailing from the pandemic, some of which eventually went bust.

"That situation has very much normalised", Muehlen said. "The real economy is entering a phase of repair work, where both public and the private sector will continuously require financial leverage.

"We are not out of the woods but we feel certain parts of Asia are ahead of Europe in terms of recovery", Muehlen said, adding that Asia - which accounts for 13pc of Deutsche's group sales - has the potential to become the single biggest RoTE contributor to the core bank.

At group level, Deutsche Bank, which continues to restructure its operations, is aiming for 9pc RoTE in its core operations by 2022, compared to 4.3pc in the first nine months of 2020 when a pick up in trading after the summer saw it unexpectedly post a small profit.

"The world is underinvested in Asia when it comes to capital markets. With a zero interest rate environment around the globe, money will try to go where the growth is and therefore we will see more import of capital into Asia", Muehlen said.

Deutsche Bank is continuing to invest in Asia, including in the region's largest economy China where regulations for foreign financial institutions including wealth managers and asset management companies have eased further in the last couple of years.

"[Wealth management] is one of several areas where China indeed may provide interesting opportunities. But we will not build a retail bank in China", Muehlen said.

Deutsche Bank's 3 billion euros ($3.63 billion) in annual Asia revenues is generated fairly evenly between corporate banking, its fixed income and currency businesses, credit origination and advisory business and wealth and asset management, including retail banking in India.