Brexit headcount: B of A, Northern Trust are in, and Deutsche’s out

More banks are showing their cards as to whether they’re staying in or leaving the U.K. after Brexit.

Deutsche Bank AG on Wednesday became the first large bank to publicly announce the beginning of a wholesale relocation of client business out of the U.K. in response to Britain’s vote to leave the European Union. The Frankfurt-based lender said it plans to complete the shift this year unless negotiators in Brussels agree on a transition period that will give banks more time.

“We have today begun to engage with clients regarding the global booking hub,” Deutsche Bank said. “We believe it is prudent to begin this process now, given less than 14 months remain until the U.K. is scheduled to leave the European Union.”

However, Bank of America and Northern Trust look to be committing to the U.K.

B of A has extended the lease on its London headquarters by 10 years to 2032, according to a spokesman. That’s well beyond the U.K.’s planned departure from the European Union. The Bank of America Merrill Lynch Financial Centre at 2 King Edward Street in the City of London, which has about 585,000 square feet (54,300 square meters) of office space, is owned by Norway’s sovereign wealth fund. A spokeswoman for the wealth fund declined to comment.

Brian Moynihan, CEO of Bank of America.

Meanwhile, Northern Trust is searching for a new London base after its current lease expires in 2022, two people with knowledge of the plan said. It has hired CBRE Group Inc. to draw up a list of options if it chooses to leave its current building in the Canary Wharf district, the people said, asking not to be identified because the plan is private.

“We have engaged CBRE in a planning effort to determine how best to maximize our space requirements,” spokeswoman Camilla Greene said in an email. London will continue to be the company’s regional headquarters for Europe, the Middle East and Africa, she said.

Speculation that the Brexit vote would prompt financial companies to move large numbers of workers out of London has yet to be realized. Banks including Wells Fargo and Sumitomo Mitsui Financial Group have leased London buildings since the vote.

“The big wild card is how Brexit will fall out,” Bank of America Chief Executive Officer Brian Moynihan said in an interview with Bloomberg TV in December. “I think it is a negative, but I don’t think it is a strong negative.”

Deutsche Bank CEO John Cryan is more skeptical. Speaking at a reception in Brussels Wednesday, Cryan said the bank needed to get the consent of its clients to move ahead with the relocation, a process that will take months. The lender is assuming a reasonable worst-case scenario with regard to Brexit — a stance he said was confirmed in talks with regulators and supervisors.

The German lender had previously announced it will make Frankfurt its primary global booking hub for the corporate and investment bank after the U.K. voted to leave the bloc. Several hundred traders and as many as 20,000 client accounts could be affected. Cryan said that while

Deutsche Bank plans to keep its London business, there’s no guarantee that the city will keep its prominent role as arguably the only relevant capital market in Europe.

“We shouldn’t be under any illusion that London will have to remain a major financial hub, will have to remain the capital market center for Europe for some time to come,” Cryan said. “We can build a replacement in the euro zone if that’s the right thing to do, and it probably is the right thing to do ultimately. But London is not replaceable between now and March next year.”

With the U.K. leaving the European Union, he reiterated a call for more integration of financial markets, including a banking union, and for a European response to competition from U.S. technology companies, which are increasingly taking business from traditional lenders.

The U.K. is due to leave the European Union in March 2019. The government is negotiating a transition period to come into effect after this date to ensure that businesses don’t face a sudden change in regulations.

Bloomberg News
Brexit Brian Moynihan Bank of America Deutsche Bank
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