The main source of income for Deutsche Bank is based in Singapore

Deutsche Bank in SingaporeLauryn Ishak/Bloomberg

To find Deutsche Bank’s biggest source of income, you have to travel thousands of kilometers by plane from Frankfurt to Southeast Asia. You will find it on the 18th floor of a glass office tower with a view of the green waters of Marina Bay in Singapore.

There Chetankumar Shah, an inconspicuous and publicly shy banker in his early 50s, heads a team that looks after complex financings. The spectrum of customers ranges from Asian tycoons to European producers of renewable energy. Papers from an Indonesian conglomerate are part of the business, but the team also deals with junk titles from an Israeli shipping company.

Few people in Frankfurt or on Wall Street may know Shah. In the accounts of Deutsche Bank, yes: Its global finance and credit trading group generates, as we hear, annual revenues of an estimated 3 billion euros. That is about a third of the Frankfurt’s total investment banking.

Conversely, the importance of Shah’s division to the institute’s earnings also shows that Deutsche Bank is still heavily reliant on businesses that involve risk when markets turn – despite years of pulling out of volatile businesses.

Risky business

Under CEO Christian Sewing, the bank is aiming for earnings growth again after a tireless cost-cutting campaign. The business of credit default swaps and possibly trading in base metals is no longer taboo. German financial regulators have already raised concerns about the risks they are taking on leveraged loans – an echo from the past for a bank that has amassed the highest legal costs in the European banking sector and has therefore produced losses for five of the last six years.

See also  Elon Musk: Tesla willing to supply software, batteries and powertrains to third parties - Image and sound - News

Under Shah’s leadership, Deutsche Bank has cemented its role as one of the world’s largest players in credit trading. Its global empire includes the bad credit trading business, which has long been a strength of Germany’s largest bank, as well as a credit department that became the engine of growth when many competitors withdrew after the financial crisis.

“He was one of the pioneers who helped us build the market business from practically nothing,” said Anshu Jain, the former co-CEO of Deutsche Bank, who worked with Shah for more than a decade and is now President of Cantor Fitzgerald. “Chetan can look back on decades of success with very good risk management.”

Chetankumar Shah – a “mystery”

In over 15 years on the Credit team, Shah has seen several CEOs come and go in Frankfurt. He was just as active under Jain as he was under John Cryan and Jürgen Fitschen. He has been head or co-head of his division for the past six years.

Despite the billions his team is pulling in, Shah avoids the limelight. He has an inconspicuous office and did not want to take a stand or be photographed for this article. He’s a vegetarian and teetotaler, loves cricket, and doesn’t even have a LinkedIn profile. Even for a banker who has worked with him for ten years, he remains a “mystery”.

As a result of the financial crisis, the private credit sector has grown rapidly across the entire banking sector. The global volume is now close to $ 1 trillion. The reason is that many commercial banks are scaling back their traditional lending and giving room to other providers and products. Deutsche Bank is one of the largest providers in this area, as is Apollo Global Management Group. Other investment banks – from UBS Group to Credit Suisse Group – have similar offerings, but none of them rely as heavily on this business as Deutsche Bank.

See also  Basel: Bringing decision-makers to local transport around one table - Basel

“Our credit business has been a constant for the bank for many years,” says a spokesman for the bank. “It offers a wide range of banking services to customers, including high quality secured loans. This activity benefits from the bank’s strict risk management processes, the diverse business portfolio and many years of experience in the credit market. “

Deutsche Bank fills a gap in the market

Shah and his staff are handling transactions in Asia and elsewhere that other firms do not dare to do, as bankers familiar with the strategy report. Behind this is the conviction that the associated risks are firmly under control. High-risk credit products are sometimes hedged with derivatives, which so far have kept losses to a minimum.

The hedges would provide protection for the loans granted by Deutsche Bank, which are often given to poorly funded but wealthy Asian entrepreneurs, the people said. The team also offers short-term financing, so-called mezzanine loans, which have an interest rate of up to 15 percent, it said.

“There is a niche in the market and Deutsche Bank is filling it,” said Tom Kirchmaier, professor at the London School of Economics, referring to the department headed by Shah. “On the other hand, lending to people with illiquid assets is always a tricky business that depends on the economic situation and country risk. You can’t just insure that. “

You can find more articles like this on bloomberg.com

©2021 Bloomberg L.P.