Securities lending is making a comeback at Deutsche Bank. When the bank completes its acquisition of Dresdner Agency Securities Lending, it will fill the hole in its securities services portfolio left after the sale of a majority of its asset servicing business to State Street earlier this decade.
Roger Harrold, global head of domestic custody services at Deutsche, acknowledges that sec lending may be currently "out of fashion" but says the market will come back and that the bank is positioning itself to be ready for when customer confidence returns.
The bank plans to complete its acquisition of Dresdner Agency Securities Lending from Commerzbank in November. The puchase will expand the bank's sec lending teams to Frankfurt, London and New York.
Harrold says initially the bank will focus its sec lending activities on a group of 10 markets before growing the business in Asia.
"We will start by keeping the clients we have and expanding with central banks and sovereign wealth funds," he says. "Then we will expand into local markets, working with local regulators to activate these securities markets."
By offering third-party sec lending, Deutsche hopes to avoid direct competition with sec lending leaders BNY Mellon and State Street -- instead it will be able to offer more specialised, tailored sec lending solutions.
The move back into the business comes after almost a decade out of the market. In 2002, Deutsche sold a significant part of its securities services business to State Street for $1.5 billion. Included in the sale was global custody, fund administration, sec lending, performance measurement services, payment benefits services and some domestic custody and clearing in the UK and US. Now the bank is rebuilding its securities services business through heavy investment and acquisitions.
"We are open for acquisitions when they provide a good strategic fit," says Werner Steinmueller, head of global transaction banking at Deutsche. "In our trust and securities services business we have pursued a bolt-on acquisition strategy witnessed by our expansion in domestic custody markets, in our newly acquired hedge fund administration business and in securities lending."
Filling out its Middle East securities services offering is next for Deutsche. The bank is awaiting final approval from Qatar's regulator to begin offering sub-custody and other services in the country, expected sometime in the fourth quarter, and plans to add asset servicing to its existing private banking and securities brokering offerings in Saudi Arabia at the end of 2010 or in early 2011.
Earlier this month, Deutsche appointed Mrugank Paranjape head of domestic custody services in South and Southeast Asia, and in May the bank was granted general clearing membership on the Hong Kong Stock Exchange.
Deutsche currently offers securities services in Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand and Vietnam. In China, the bank is restricted from offering a full product plate due to regulatory restrictions and stipulations related to its 2002 sale of its global custody business; it currently offers limited sub-custody services in the country.