Germany’s Deutsche Bank (DBKGn.DE) has a stern warning to European firms borrowing from U.S. lenders: They will abandon you when times get hard. The warning, explained in an interview with Deutsche Bank board member Fabrizio Campelli, is the latest escalation in a battle with U.S. banks for the business of European companies on its home turf.
It reaches at a time that the corporate banking unit of Germany’s biggest lender is seeing a resurgence in the wind-up of an extensive overhaul.
“A number of European corporates are already realizing the risks of not operating with companies that are long-term committed to the geographies … in which they operate,” he said, without mentioning any examples.
Campelli, who is in charge of Deutsche’s corporate division together with the investment bank that powered Deutsche through the overhaul, said U.S. banks “tend to flex lending up and down depending on circumstances”.
He added, again without citing examples:
“There was evidence of non-German banks in this country taking lending off the table while German banks were going longer-credit during the pandemic, in 2021,”
In 2021, five of the biggest U.S. banks – JPMorgan, Bank of America, Morgan Stanley, Goldman Sachs, and Citigroup – bagged a combined 35% share of the revenue for loans by German firms, a rise from 18% a decade ago, according to data from Dealogic compiled for Reuters.
Deutsche Bank Chief Executive Christian Sewing recently cautioned of the “danger” of European dependence on foreign banks, comparing the threat to the region’s reliance on outsiders for energy.
Deutsche Bank has long underscored a need for Europe to have strong banks to compete against U.S. and Chinese peers, but the latest rhetoric indicates a more aggressive tone.
Campelli called for a “concerted approach” by regulators and politicians to back European banks.
The Tide Is Turning
In 2019, Deutsche launched a revamp, vowing to move away from its volatile investment bank and towards its more staid businesses that serve individuals and corporations.
Having long grappled to carry out that pledge, the tide, lifted by hiking interest rates, is turning. Higher borrowing costs are building up profits from regular banking, although war, energy costs, and runaway prices cloud the horizon.
“We’re now getting there,” said Campelli, who previously led the overhaul. “Did we rely more on the investment bank during … 2021-21 than we initially expected? Yes. We’re starting to see a much more balanced earnings mix.”
U.S. banks spurn the criticism. JPMorgan, currently one of the biggest banks in Germany, says it is committed.
Stefan Behr, head of JPMorgan‘s operations in Europe, told Reuters he hasn’t run into any pushback on its expansion in Germany and noted that “many of the German banks work with us on deals as well as us being a banking partner to them.”
“There’s competition for every deal. And when they don’t win it, I’m sure that they’re not happy about it, just like we’re not happy if we lose a mandate.”
Stefan Hafke, Citigroup‘s head in Germany, told Reuters that its client base in Germany is comprised of “very long-term, sustainable relationships.”
He said he needed strong European banks in Germany and disapproved of being a mere U.S. bank. “We are operating on an equal footing with anyone else,” he said.
Goldman, whose headcount in Germany has increased in recent years, would not comment. Morgan Stanley did not instantly reply to a request for comment.
A spokesperson for Bank of America said Germany was extremely important to its strategy, saying:
“There is no pullback.”