Low-flow monster: Deutsche Bank made the call after the crisis to focus its fixed-income business on flow, branding itself a “flow monster” and setting its sights on the top of the volume table. But it has focused its structured finance division firmly off-the-run, mixing principal finance with ABS to powerful effect, making it IFR’s EMEA Structured Finance House of the Year.
Ever more products seem to fall into the structured finance bucket at Deutsche Bank, but this means the bank keeps its seat at the top table in every sub-market of a diverse business line.
Deutsche has not always had a reputation for being a seamless organisation – what is now called structured finance, in particular, touches on a huge range of businesses.
In the past two years, however, these have all been pulled together under group head Elad Shraga, with the creation of a new structured finance vertical focused on the profits the asset class can deliver to the bank, not just volumes.
“The ideas of breadth, diversity, quality, innovation and consistency are real – we want to be the leader in high-value transactions,” said Daniel Pietrzak, co-head of structured credit at Deutsche.
Shraga is a prop trader by background, and the business he runs now seeks out the juiciest principal finance opportunities on offer, combining balance-sheet appetite with structured finance exits like in Consumer Auto Receivables Finance, backed by a portfolio of Irish auto loans bought from Permanent TSB.
The main benefit of this vertical seems to be keeping many balls in the air. A lot of banks have excellent franchises in ABS trading, private market structured finance, flow ABS, RMBS, structured CRE lending, CMBS, CLOs, structured project bonds and WBS; but none except Deutsche have a top-tier EMEA presence in all of them.
In Europe, the two biggest market developments in 2013 were the full revival of CLOs and CMBS, and Deutsche has punched its weight in both.
Before Taurus priced in May (see EMEA Structured Finance Issue), Deutsche already had three post-crisis CMBS to its name – and it printed three more, spanning the range from flow (GRF 2013-2) to unrated notes (Chiswick Park refinancing) to private (Monnet).
In CLOs, Deutsche priced two deals – for GSO Capital Partners and for CQS Investment Management. CLO arrangers have all been anxious to parade their commitments to broad distribution, transparent, equal pricing and public bookbuilds, but Deutsche, to its credit, has delivered, publishing pricing alongside coupons on its deals.
The newest string to Deutsche’s bow comes in the form of whole business securitisations, traditionally a fiefdom of the UK banks (who do most of the bank lending to sponsors) and especially of RBS.
In the awards period, Deutsche was joint global co-ordinator on The AA, which applied whole business securitisation to an asset-light issuer for the first time, nudging the Class A notes over the investment grade line to a BBB– rating.
Across flow ABS, Deutsche has seen plenty of action too – though missing out on mandates for repeat high-volume programmes Orange Lion and Storm has cost it league table position.
But doing auto deals backed by UK, German, French and Norwegian assets, RMBS from the UK and the Netherlands (selling some of Achmea’s deal to Asia), and consumer loans from Italy and Spain (Banca Etruria and the €600m store card deal from El Corte Ingles) demonstrates the bank’s diversity.
It backs this flow up with balance sheet. Doing Etruria’s debut consumer loan deal meant buying it – but it gave a small Italian lender access to term liquidity, in a format that nobody else said could be done.
Deutsche put its rating to use too. For instance, it took on the swap counterparty role on the €5bn BBVA RMBS 2 – an essential role in a market where willing swap providers are scarce.
Deutsche is also leader in the secondary market. The team was regularly cited as a top house by the buyside, usually along with the US banks. It trades an average of €3.4bn original face every month, putting it right at the top of the European volume table. Here, if not in primary, Deutsche deserves the flow monster reputation.
The structured market needs flow execution, and it needs flow liquidity providers, and Deutsche can do both. But it also needs institutions to push into every European jurisdiction and asset class in whatever format the situation requires, backed by manpower and balance-sheet commitments.
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