A logo is seen in front of the Deutsche Bank headquarters at dawn in Frankfurt. Deutsche Bank has formed a committee, known informally as the “haggis” team after the Scottish offal dish, to poach RBS’s biggest customers as the Edinburgh-based lender retreats from commercial banking outside of the UK.

Bloomberg/London


Deutsche Bank has unleashed its plumbers on Royal Bank of Scotland Group.
Germany’s biggest bank has formed a committee, known informally as the “haggis” team after the Scottish offal dish, to poach RBS’s biggest customers as the Edinburgh-based lender retreats from commercial banking outside of the UK, said two people with knowledge of the matter, who asked not to be identified discussing the bank’s internal operations.
Leading the charge is Deutsche Bank’s global transaction banking team, who call themselves “plumbers” to reflect their low profile compared with dealmakers and traders. They help firms manage cash and process payments, activities where RBS has already started referring some clients to BNP Paribas.
“We’ve put a team together to go after our target clients who used to bank with RBS, and won numerous cash and trade management mandates,” Michael Spiegel, head of trade finance and cash management for corporates at Deutsche Bank, said in an interview.
“We expect these to become long-term stable and fee-based income streams, which the bank loves.”
Co-chief executive officer John Cryan is counting on the division to counterbalance a trading arm that will become less profitable as Deutsche Bank’s capital requirements get tougher.
Deutsche Bank shares fell for a sixth straight day, declining 1.8% to €26.92 at 1:09 pm in Frankfurt. They have risen 7.7% this year, while RBS shares dropped about 17% in that period.
Cash-management relationships are considered lucrative as companies rarely change their provider, due to the complexity and depth of connections they establish. Werner Steinmueller runs Deutsche Bank’s transaction banking division.
“As we focus our transaction services business on our home market capabilities in the UK and the Republic of Ireland, in line with RBS’s strategy to become a simpler, stronger and more sustainable bank, our priority is to continue to treat all our customers fairly,” Marc Townsend, head of RBS’s global transaction services, said in a statement.
The BNP arrangement means “there is a streamlined process in place to make the transition as smooth as possible” and RBS will support customers wanting to move to other firms, Townsend said. RBS declined to comment on Deutsche Bank’s activities.
After former CEO Fred Goodwin’s acquisitions made it one of the biggest lenders in the world, the bank was nationalized by the UK during the financial crisis, and its government overseers are privatising RBS as a British-focused entity.
Cryan, 54, replaced co-CEO Anshu Jain at Frankfurt-based Deutsche Bank last month and immediately said he would prioritise the transaction arm, which also arranges trade financing for companies.
We have a “first-rate international businesses in transaction banking, which will be the continued focus of investment,” Cryan said July 1, his first day in the job.
The transaction banking unit’s revenue rose 11% to €1.14bn ($1.3bn) in the second quarter from a year earlier, while pretax profit jumped 28%, Deutsche Bank’s filings show. It’s the smallest of Deutsche Bank’s four units, with revenue that was less than a third that of the investment banking and trading division’s income last year.
Nevertheless, it’s the most profitable and cost-efficient unit. Transaction banking generated a pretax return-on-equity of 19% last year and had a cost-income ratio of 68%. That compares with a 11% return on equity and a cost-income ratio of 78% in the investment bank.
Spiegel said Deutsche Bank has identified 200 separate business mandates from different firms that banked with RBS. After working their way through half that list, they’ve won business from at least 60% of those targeted, he said. He declined to provide the names of any companies that have moved from RBS to Deutsche Bank, citing client confidentiality.
Some RBS customers have approached Deutsche Bank on their own, Spiegel said. “They’re concerned about the deterioration in service and quality as people from RBS leave transaction services, which has already started to happen.”
RBS said last month it will refer thousands of its biggest customers for cash management and trade finance to France’s BNP Paribas, as it will no longer be able to service them. Multinational companies including Royal Dutch Shell Plc had already started looking for other banks, people with knowledge of the matter said in June.
London-based BNP spokesman Andrew Achimu declined to comment by telephone.
Wholesale transaction banking will generate revenues of $604bn by 2023, up from $259bn in 2013, according to a report by Boston Consulting Group last September, its latest forecast for the industry. Emerging markets will account for 72% of that growth, led by Asia-Pacific.
“Transaction banking has been steadily rising in importance” because risk and capital requirements are low, combined with high returns on equity, BCG said.
While the risk profile of the business means it has comparatively low capital requirements, the technology and compliance costs are high, according to Spiegel.
The bulk of the €1bn Deutsche Bank is pumping into the unit over the next five years will be invested in improving the bank’s computer software and systems, he said.
“We’ve traditionally been seen as the unglamorous, utility side of banking,” said Satvinder Singh, head of Deutsche Bank’s trust and securities services business. “Since the 2008 post-Lehman collapse, people love transaction banking: the plumbers have become sexy. In the next 10 years we’re going to be the defining business for client relationships.”