As Deutsche Bank prepares to complete its $10 billion acquisition of Bankers Trust Corp., chairman Rolf E. Breuer is laying big plans for the United States.
In a written response to questions submitted by American Banker, Mr. Breuer said he would expect one-third of Deutsche Bank's overall profits to come from the United States in three to five years.
"We always stressed that we want to be one of the leading global participants in wholesale banking," Mr. Breuer said. "And global means you have to have a strong presence in the U.S."
Mr. Breuer's goal is a lofty one. Deutsche Bank, a $692 billion-asset company based in Frankfurt, currently has only $50 billion of its assets in the United States. With Bankers Trust's $133 billion of assets, that would represent only 22% of Deutsche Bank's balance sheet.
Bankers Trust has for several years earned more than half its profits outside of the United States. And the New York banking company posted a loss of $6 million for 1998.
As a result, some analysts said Mr. Breuer's forecast indicates that Deutsche Bank has other ideas for expansion in the United States, in addition to swallowing Bankers Trust.
"That target would imply some other strategy such as making another large acquisition," said Sean Ryan, a banking analyst at Bear, Stearns & Co. Inc. "The problem is this is a much more competitive market than any European company is used to, and the coveted business is in equities, which is even more ferociously competitive."
Lawrence Cohn, a banking analyst with Ryan, Beck & Co., said, "Assuming Bankers Trust earnings bounce back to normal levels, it still means that they're looking for very aggressive growth in the United States."
Bankers Trust in 1999 is expected to recover from some of the problems that plagued it in 1998, such as losses in the emerging markets. According to First Call Corp., Boston, analysts estimate the bank will earn $522 million this year.
Meanwhile, Deutsche Bank is likely to earn $1.2 billion this year, according to the First Call consensus. While those figures suggest Bankers Trust would contribute about 30% of the combined companies' earnings, that would include Bankers Trust's extensive non-U.S. operations.
But in his written comments, Mr. Breuer said a combined Deutsche Bank and Bankers Trust would be much greater than the sum of its parts.
"Because our two companies are so mutually complementary in terms of customer base, geography, skill sets and organizational capability, we can truly achieve much more together than we could have separately," Mr. Breuer said.
He added that "Deutsche has long since ceased to be a purely German firm."
Indeed, while Deutsche's efforts to build a strong U.S. capital markets operation over the last several years have not succeeded, the bank does engage in a broad range of commercial banking activities in this country, including corporate banking, leasing and asset management.
Still, to achieve Mr. Breuer's goal, Mr. Cohn said Deutsche Bank would have to pump large amounts of investments into its combined U.S. operations at a time when business is expected to grow faster in Europe, following the introduction of a single currency in the European community in January.
"What it says is that they are not as optimistic about growth in the euro markets as in the U.S. dollar market, which strikes me as a little strange," Mr. Cohn added.
In his written responses to this newspaper's questions, Mr. Breuer, 61, provided his views on a wide-range of issues confronting Deutsche Bank as it prepares to acquire Bankers Trust. Excerpts from his comments appear below.