Prada Case Analysis

Week 3 Case Analysis: Deutsche Bank and the road to basel III

Deutsche Bank had a global flair from the get go, it suffered a number of setbacks towards the end of the 19th century owing to wars and depression but regained its strength in the period from 1990 to 2000 as it shifted focus from  commercial retail banking towards investment banking. Post 2000, Deutsche bank increased its assets dedicated to investment banking from Euro 640 billion to 1860 billion. During this period the then CEO clarified that a universal banking model which emphasised both commercial as well as investment banking activities would take precedence over just pure play investment banking. In the beginning of the 21st century Deutsche bank was deriving a large part of its revenue from investment banking activities, peaking in 2007, however in the years following that, and in the wake of the GFC the share of investment banking activities fell to 56% and the share of commercial retail banking activities rose from 19% in 2007 to 31% by 2012, as starting in 2010 the retail banking assets of deutsche bank had grown on an absolute and a relative basis. A point to be noted here is the despite the percentage fall in the revenue derived from investment banking activities Deutsche Bank increased its participation in European equity underwriting from 9.3% to 12%. It also acquired a significant stake in post bank to establish firm ground in home country while expanding in the international market.

Investment banking institutions mainly serve businesses whereas commercial banks accept deposits and lend loans. Deutsche Bank expanded towards wholesale commercial banking so as to become a one stop solution for all banking needs a customer might have, also investment banking activities had become a significant revenue generating stream in the first decade of the 21 century. Deutsch bank was fast emerging as one of the largest banking institutions in Europe. With the advent of globalisation the competition grew tenfold and Deutsche bank utilised the advantages that accrue due to economies of scale with respect to expanding its investment banking sector. In the face of tough competition and in order to gain new customers and retain existing ones Deutsche Bank had to apply a globalised approach to banking. As rivalry between the banks increased so did the focus on investment banking activities.