Charles Aldington Chairman, Deutsche Bank, London

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Charles AldingtonChairman, Deutsche Bank, London

• Focus Europe Market realities

Presented at the Bankers Association for
Finance and Trades83rd Annual Meeting A Global
Focus
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Market realities I

• MIFID will make more of a level playing field
  across Europe in the wholesale area. It is the
  essential preliminary to opening up in retail but
  that is slow in happening
• Small cross border acquisitions have always
  happened. Moves to acquire meaningful market
  share are beginning Scandinavia, Abbey in the
  UK (Santander) and now Italy
• But what are most bankers in Europe in practice
  focusing on?
• Cost ratios
• Outsourcing
• Credit portfolios
• Agreeing on common Euro payments system
• Implementing Basel II
• Defining their regional roles

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Market realities II

• Where do people see opportunities?
• Across Europe there is a demand for retirement
  products.
• That leads to Funds management and to
  Distribution of funds
• That leads also to the development of risk
  protected product for retail
• Consumer finance
• Back office outsourcing is not only going to
  India. Infrastructure services are being bundled
  within countries and Eastern Europe offers
  popular software and Ops centres
• Fast growing economies (East and South Europe)
  offer more opportunities than the mature North
• Cross border is key to realising volume
  synergies. Gradually Banks are beginning to
  believe that Europe will become a single market
  as it already is for Manufacturing Industry

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Market realities III

• What are the Commercial Issues with cross border
  moves?
• Cross Border Acquisitions
• Domestic consolidation is driven by changes to
  the established structures of savings and
  cooperative Banks. That is moving at different
  speeds in different countries and there is often
  a political brake where public ownership is
  involved. That process will create opportunities
  for foreigners
• Access for foreigners tension between Brussels
  and local regulators
• Valuations Absolute numbers are low, but that is
  a function of profitability
• Can I really import my home country experience to
  turn around something in another country?

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Market realities IV

• Acquisitions remain the only way to acquire a
  local client base in reasonable time. Expect the
  number to creep up as it is possible to assess
  the experience of the pioneers
• A non-European Institution will want to consider
  whether a presence in one EU country can be used
  as a bridgehead for others
• Wholesale certainly
• Retail slowly, ways will be found

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Market realities V

• ....and if you dont Buy Cross border?
• Cross Border Retail Sales no consensus on the
  issues
• Will Consumers buy cross border?
• How serious are National regulatory and tax
  hurdles?
• Brussels is unlikely to push for an early
  Directive in this space
• Alternative models will include
• White labelling
• Distribution cooperation
• Infrastructure cooperation

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