The Risk Of Borrowing From American Lenders, According To Deutsche Bank

European businesses borrowing money from American lenders are given a stern warning by Germany’s Deutsche Bank: If conditions go rough, they will stop lending to you.

The warning, which was outlined in an interview with board member Fabrizio Campelli of Deutsche Bank, is the most recent escalation in a struggle with American banks for the patronage of European businesses on its own soil.

It occurs as the largest lender in Germany’s corporate banking division is seeing a rebound as it nears the conclusion of a protracted restructuring.

Without giving any specific instances, he said: “A lot of European corporates are already realizing the risks of not engaging with companies who are long-term dedicated to the geographies… in which they operate.”

Campelli, who is in charge of both the investment bank and Deutsche’s business division, claimed that American lenders “tend to flex lending up and down depending on conditions.”

Again without providing any specific examples, he continued, “There was evidence of non-German banks in our nation pulling financing off the table as German banks were going longer-credit during the epidemic, in 2020.

According to statistics from Dealogic from a recent report, the five biggest U.S. banks last year—JPMorgan, Bank of America, Morgan Stanley, Goldman Sachs, and Citigroup—took home a combined 35% share of the revenue from loans made to German companies, up from 18% a decade earlier.

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Christian Sewing, the CEO of Deutsche Bank, has issued a warning over the “danger” of Europe’s reliance on foreign banks, equating the threat to the area’s reliance on outsiders for energy.

Deutsche Bank has always emphasized the necessity for Europe to have powerful banks in order to compete with American and Chinese rivals, but the most recent rhetoric indicates a more confrontational tone.

In order to support European lenders, Campelli urged politicians and regulators to take a “concerted approach.” In 2019, Deutsche started a transformation with the goal of moving away from its erratic investment bank and toward its more conservative operations that cater to businesses and consumers.

After years of failure to fulfill that promise, the tide is now changing, helped along by rising interest rates. Although conflict, skyrocketing prices, and energy expenses are casting a shadow over the future, higher borrowing costs are fattening earnings from conventional banking.

Campelli, who had previously been in charge of the renovation, stated, “We’re now getting there.” “Did we depend on the investment bank more in 2020–2021 than we had anticipated? Yes. A significantly more balanced mix of earnings is beginning to emerge.”

American banks dispute the criticism. One of the biggest banks in Germany today, JPMorgan, claims to be devoted.

According to Stefan Behr, head of JPMorgan’s operations in Europe, “many of the German banks cooperate with us on projects as well as us being a banking partner to them,” he hasn’t noticed any resistance to the bank’s expansion in Germany.

“For every contract, competition exists. Just like we’re not happy if we lose a mandate, I’m sure they’re not happy when they don’t win it “said Behr.

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According to Stefan Hafke, head of Citigroup’s German operations, the company’s clientele in Germany consists of “extremely long-term, durable connections.”

He argued against being a purely American bank and stated that he desired strong European banks in Germany. We are conducting our business on an equal basis with everyone else, he declared.

Goldman declined to comment despite a recent increase in employment there. A request for comment from Morgan Stanley did not receive a prompt response.

There is no pushback, according to a Bank of America representative, who also stressed that Germany is crucial to the company’s strategy.

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