Deutsche Bank is returning to Silicon Valley, the site of one of its most prominent investment banking embarrassments.
The chief of the bank's U.S. operations confirmed that plans are afoot to bolster its 260-member investment banking staff in Northern California by 30%, or about 80 employees, by yearend.
John A. Ross, chief executive officer of the Americas for Deutsche Bank, said the decision represents a commitment to the high-tech industry and to the wide range of investment banking products used in the region.
"The technology forum is a key industry group," Mr. Ross said. "The growth in this sector and our global presence necessitate continued investment in this field."
The move is somewhat of a surprise. Northern California is among the most competitive regions for investment banking products in the world. The high-tech market is saturated with such names as Bank of America Corp., BankBoston Corp., and Credit Suisse First Boston.
The decision to boost Deutsche Bank's technology banking team echoes recent statements by its chairman, Rolf E. Breuer. In early June, Mr. Breuer said he expects to build on the base Deutsche Bank now has, primarily by hiring teams of investment bankers rather than through outright acquisitions.
"Having bought Bankers Trust, the statement is now to proceed on an organic level," said Ian McEwen, an analyst with Lehman Brothers in London.
It was only a year ago that Deutsche Bank lost its technology banking head, Frank Quattrone, to Credit Suisse. Mr. Quattrone is considered one of the most prominent financiers in Silicon Valley.
At the time, Mr. Quattrone said that his departure had to do with Deutsche Bank's "Europe-first" strategy, which he said was a poor fit for his interests.
But in a recent interview, a high-ranking bank source said the departure resulted from Deutsche's unhappiness with a profit-sharing agreement it had made with Mr. Quattrone.
The negotiated agreement required Deutsche Bank to pour money into the operation, yet allowed Mr. Quattrone's group to keep profits if the group enjoyed early success.
To Deutsche Bank's surprise, Mr. Quattrone's group produced stunning results at the outset-but because of contract requirements, the profits of those early successes were lost to the bank.
"In our opinion it was the loss of losses," the source said.
Deutsche Bank executives said the lopsided agreement was deemed unacceptable at headquarters in Frankfurt. Mr. Quattrone refused to renegotiate it and instead left the bank.
Mr. Quattrone went to Credit Suisse, taking 131 investment bankers from Deustche Bank's California operations along with him.
In the year that has followed, Deutsche Bank executives say revenues from Northern California have remained steady, despite the mass defection, though they declined to give specific numbers.
Nevertheless, said Lehman's Mr. McEwen, Deutsche Bank's well-documented problems in investment banking may be increasing pressure on its U.S. investment banking venture to succeed. He said, however, that he believes the venture will be successful.
"In the short run, the business as a whole is in a restart mode with the acquisition," Mr. McEwen said. "But I know there will be little patience in the market if more problems arise. It could be a rocky road."