Fitch: DB's LatAm Departures to Drive Slight Market Shifts
Absolute revenue and profits from the LatAm countries DB is leaving are a fraction of DB's overall business. Of the 10 countries DB will depart, five (Mexico, Chile, Peru, Argentina and Uruguay) are in the LatAm region. The move confirmed DB's stated plans to reduce the number of countries in which the bank operates. Specifically, DB is cutting the number of trading desks in emerging markets, including LatAm, in order to conduct operations through hubs located in developed markets. DB's Mexico, Chile and Peru operations were predominantly trading-focused businesses.
Global banks with sizable LatAm subsidiaries that operate trading and IB businesses, such as Citi, Santander, Banco Bilbao Vizcaya Argentaria, JPMorgan and Bank of America Merrill Lynch, could pick up some of the business left behind, as well as local clients that would now fall outside of DB's higher strategic focus on key global clients; so too could local players in the region, such as Itau Unibanco and BTG Pactual.
Excluding Brazil, DB's reporting indicates that, as of year-end 2014, LatAm was contributing gross revenue of about EUR215 million and pretax income of about EUR147 million. Credit exposure across Latin America, excluding Brazil, was about EUR8 billion as of year-end 2014.
Withdrawing bank operations from the LatAm region has occurred for other global banks grappling with higher capital requirements, tighter risk controls and below-target returns, such as HSBC and Barclays.
DB's withdrawal plans did not include an exit from Brazil, where the bank has long operated. For DB's Brazilian operations, the restructuring plan is aligned toward a more commercial corporate banking-focused model, in contrast to a more investment banking-focused business model.