Ares & Co


Implosion or Deployment

Implosion or Deployment

The tale of the tortoise and the rabbit

Since decades, Deutsche Bank (DB) and BNPP have been on the top European Banking leaderboards. The publication of their respective Q3 2015 results and the comments published are showing a stark difference: DB is at the risk of implosion and BNPP is steadily deploying its strategy.

If one has some memory, and looks twenty years back, the parallel between the two firms is somewhat enlightening, specifically because their starting points where somewhat close: a universal bank notably with a retail bank, and a CIB mainly focused on the national corporates, and an international network, focused on following the corporates and Private banking clients.

DB made along the years a number of decisions which slowly change the Bank´s profile, notably: shut down a number of branches in Germany for Retail banking, increase the CIB footprint in terms of products and geographically, buy Deutsche Post bank to compete with HSBC and Citi on the transaction banking activities (to name a few).

At the same time, BNPP decision where focused on increasing its Retail banking "domestic" market (France, Benelux, Italy and now Germany) and prepare the next one in the US aggregating around Bank of the West some smaller banks; stick to a CIB focused on serving large corporates, increase cautiously its international network, and all the "products division", say Asset management, have their own strategy but has to be consistent with the core group strategy. Both banks have recently been caught into some investigations and have (will have) to pay significant fines.

Recent announcements, and their details provided through the presentations which can be found in the Investor relations section of their Corporate web site, show the stellar differences. DB is announcing the commitment of its newly appointed leadership team. In twenty years DB had six different equivalent of a CEO, BNPP have had two. Reading the DB plan is really mind bugling: as core to its strategy there are things like: "Better align reward system and conduct to returns". BNPP in its slides detail the roll out of a strategy that translates into hefty numbers.

To conclude, the two banks have now different profiles, and on one side the volatility of the strategies and of the management of DB contrasts with the determined strategy and its steady implementation of BNPP. The tale of the tortoise and the rabbit could an easy analogy, but is it also the tale of management styles opposition, team building and succession planning orchestration, opportunistic investments; greed; strategy confused with tactics?