Deutsche Bank's wealth turnaround is already bearing fruit in the Swiss market, country boss Marco Pagliara told finews.com. He recounts how the German lender wants to overcome a scandal-tarnished legacy.

Marco Pagliara, you’ve had two jobs in less than one year since joining Deutsche Bank from Goldman Sachs last year. What goals do you have?

Our focus in Swiss onshore is expanding among the Bilanz 300 families-type of client. The foreign beneficial owner market – families which have either relocated here, or where part of their set-up is managing their money in Switzerland – is also an interesting opportunity.

The Bilanz richest begins at several hundred million. Is that your target client?

That’s certainly the aspiration. Our franchise needs to expand the coverage of ultra- and high net worth families. The second priority is emerging markets, primarily Middle East and Eastern European including Russia, and Latin America and, in certain situations, Asia.

What can you offer your clientele that others in the ultra-high wealth market cannot?

Deutsche is one of very few institutions in Europe that combines a wealth and asset management franchise at the core of the bank with global ambition and quite excellent execution in global markets and corporate finance, especially in certain asset classes like fixed income and foreign exchange.

Trump, Danske, Wirecard: Deutsche's brand has had its difficulties.

The bank has navigated rather choppy waters over the last few years. But Deutsche’s brand has a strength and recognition that is stronger than I had expected.

«UBS and Credit Suisse are benchmarks»

Now that we start to see operational results coming through in the wake of diligent restructuring, the brand is reacting quite quickly because people buy into that.

The ultra market is a highly-sought after space that others have begun cultivating years ago. Who is your stiffest competitor?

Among the Swiss, global family offices initiative as UBS’ and similar efforts like at Credit Suisse are a compatible benchmark. I think we’d have an edge on investment banking and global markets, especially in certain asset classes.

«Clients don't want all their eggs in one basket»

Some of the commercial and global banks in the U.K. and in France, like Barclays and BNP that have that cross-divisional capability, a large balance sheet, and a good lending operation too.

You joined from Goldman Sachs – which is trying to redraw wealth management.

A large family office will talk to big U.S. organizations like J.P. Morgan or Goldman Sachs because of the tight integration between wealth management and execution on the market side. As a client, I don't think you want to have all your eggs in one basket.

«Behind the Swiss gloss and patina may be a limited offering»

American banks have been quite inconsistent in the amount of resources and type of commitment they put towards Europe, depending on trends and cycles. It’s always intelligent for private clients to diversify with multiple trading counterparties to test execution and pricing.

Aren’t clients coming to Switzerland for a Swiss bank, not a German-owned one?

You can be a pure-play Swiss private bank with the gloss and patina, but with a comparably limited offering in the way of global solutions and products. Ultra- and high net worth clients have a high degree of sophistication. Other factors become more relevant: what execution and terms can you offer, how attractive or constructive your lending policies are.

Deutsche Bank is an aggressive lender of balance sheet to draw in clients. What happened to these loans in the turmoil of March and April?

We have had certain single cases of pressure, but it wasn’t problematic. If a bank has a knee-jerk reaction in aggressively calling loans when a client is in temporary difficulty, you’ve lost that client. We were actually able to start some relationships with clients who were disappointed on how aggressively some other banks have reacted to market corrections.

We’re more than midway through 2020. How is your business in Switzerland faring?

The first half is significantly – single-digit percentage growth – above last year on revenue and profit. The first quarter was absolutely standout, the second quarter was more challenging and in line with last year. The third quarter so far is encouragingly positive.

What is feeding that rise?

Revenue traction based on higher transactional income and net new money. We’ve inverted the trend of many years’ cleanup and shrinkage, and started growing. It’s also cost control.

Where is the money coming from?

We saw outstanding performance from the Middle East, significant growth in the rest of EMEA, and slower Latin America.

There’s been an enormous amount of chopping and changing within the wealth unit itself, how as that complicated your efforts?

When Claudio [de Sanctis, an ex-Credit Suisse private banker who now oversees Deutsche's wealth management arm] and other people arrived here, we needed to invest to bring the front-office staff to a level where it could cope with the challenge.

«We'll keep adding people»

We’ll continue to add people, and produce results with the right squad in place. Stability is a goal we need to deliver to have credibility in front of the client.

What legacy issues are you most worried about the private bank?

There were decisions made over the years around client relationships and business that, with hindsight, were questionable. Under Christian [Sewing, Deutsche CEO], the bank has undertaken a very concerted, driven job in dealing with them.

«The legacy clean-up isn't simple to deal with»

We have a much cleaner and far more simplified portfolio. But this is a big institution that operated cross-divisionally in many markets for many years, so the legacy portfolio has not been a simple one to deal with.

When do you expect that might be wrapped up?

I think we are very confident that we are in a much better place than we used to be. Coming from a different organization, I draw confidence that the standard at Deutsche is no different or in certain cases more control- and protection-oriented than at other banks.

What other parts of Deutsche’s Swiss business would you like to expand, like investment banking?

We expect to see continuing and incremental growth, but with a moderate pace and a sensible investment.

«Too many private banking acquisitions destroyed value»

I think as we see Deutsche Bank as a going-concern start generating a return in line with investor expectations, we will be able to grow and continue the investment and grow on that side as well.

M&A in the Swiss market remains pretty active – an opportunity for you?

There has to be an industrial logic and that has to be comfort that you're creating value rather than destroying value. I've seen too many acquisitions that have destroyed value in this space. That said, part of our discipline is to deliver results, and for that to transpires into our share price and economic results, and a better currency to do things like that.

Marco Pagliara is Deutsche Bank's head of wealth management in Europe (excluding Germany, Italy, and Spain), the Middle East, and Africa as well as its CEO and country officer for Switzerland. The 47-year-old Italian banker joined last June as a wealth market head for part of Europe, but was promoted after just five months when his boss, Claudio de Sanctis, advanced. Previously, Pagliara was a managing director at Goldman Sachs in Zurich. He began his career in 1997 as an associate at McKinsey after earning a business degree from Milan's Bocconi University and an MBA in finance from Columbia.