Deutsche Bank profits soar to Rs. 350 m

Hiran H. Senewiratne

Bank operations: Deutsche Bank (DB) profits were up by 300% to Rs. 350 million on an after-tax basis due to income growth from increased cash management deposits, and capital market services including forex trading, securities, and custody, as well revenue from higher international remittances. according to last published Sri Lanka results.

"This is a pleasing growth across all aspects of the business with the global markets and global transaction business fully meeting internal expectations," Chief Country Officer, DB, Stefan Mahrdt said in an interview.

In June last year DB increased the capital in its Sri Lanka branch by Rs. 1.89 billion (EUR 15.54 million). This was part of a very deliberate strategy to the Bank has in broader Asia, which is to invest in markets where we see a strong future growth.

On a pure profit basis, Sri Lanka has been one of Deutsche Bank's real success stories in the region and we are strongly committed to further development of our business in Sri Lanka which we believe offers significant long-term growth potential.

The capital we have injected will go into increasing staff numbers, increasing our local technology infrastructure and a renewed product development push with local corporates and regulators.

Globally, Deutsche Bank achieved an outstanding result in 2005 with record performances in both the corporate and investment bank and in private clients and asset management. The Bank reported a pre-tax profit of EUR 6.4 billion, up 58 per cent for 2005.

Since opening its office in 1980, Deutsche Bank has established a leading presence across every business area in which it competes and remains strongly committed to this market evidenced by a Rs. 1.89 billion (EUR 15.54 million) capital increase in the Sri Lanka branch made in June last year.

In cash management, the bank now delivers dividend payment and salary payment services to a number of major local publicly-listed blue chip companies and multinationals. Similarly, Deutsche is a leading player in foreign exchange sales and trading and money markets, as well as offering innovative solutions in trade finance.

The Bank is very supportive of government efforts to further develop capital markets in the country, and is optimistic about future growth in a number of new areas.

With the liberalisation of the currency regime Deutsche Bank has seen an increase in the demand for sophisticated hedging techniques and we believe foreign exchange and trade finance represent areas of significant growth for the bank.

"We also believe international interest in Sri Lanka will grow with further potential public sector reform, the possibility of a number of large infrastructure opportunities, and further capital market liberalization," he said.

Excerpts from the interview:

Question: DB is the custodian bank for the issuance of bonds Sri Lankans living in overseas what is your opinion about it?

Answer: This is a very positive development on a number of fronts. Not only does it give greater diversity to the funding base of the country, it also provides Sri Lankans living overseas the opportunity to invest in their country. We're very pleased to have played a role in such a milestone transaction for Sri Lanka.

Q: Being an international bank how do you face the competition in the country?

A: Firstly, in terms of defining our competitors, we don't compete against local banks in Sri Lanka.

They are our clients and we partner with them from a technology and knowledge-based perspective. In terms of competition from other international investment banks, in Sri Lanka and other Asian countries, we have a distinctly local approach to markets and to client coverage, which is supported by our leading regional and global teams.

In terms of achieving our growth objectives for Sri Lanka, we believe we will get stronger results investing in our staff and technology and product development.

There are probably only two other investment banks in Asia which have a similar geographic footprint - and Deutsche is unique in terms of product in Global Markets and Global Transaction Banking and the foreign exchange and debt sales and trading presence we have in the region.

So we are not just building up resources in the typical capital market hubs of Hong Kong and Singapore - instead we hire and train people on the ground to replicate the strength of our global businesses and build local expertise.

Q: What are your financial predictions for this year?

A: We are confident of achieving significant further growth here this year because we have a resilient business model and our growth performance in Sri Lanka has been consistently strong as evidenced by our last published Sri Lanka results for full year 2004.

Q: How do you look at the present economic condition in Sri Lanka?

A: A lot has been achieved in Sri Lanka over the past few years, and looking to the future Sri Lanka's position as an emerging country in the Asian region does predispose the country to a number of positive demographic and growth forces.

One area of significant potential is the ability of Sri Lanka to leverage India's growth. Sri Lanka is very close to one of the fastest growing markets and it has a free trade agreement in place with India, and similar to that market, has a large population of educated English speakers.

It's important that economic factors such as the budget deficit, foreign currency reserves, and inflation are all well managed in order to achieve sustainable development.

I think that further liberalisation and reforms of the state-owned sector will be important. Particularly in infrastructure where positive steps will help to further open up the economy and further stimulate international investment.

Q: How would peace affect the economy?

A: Peace is a vital pre-requisite for future robust development- the ceasefire brought huge benefits to the country in terms of economic prosperity and so clearly this will be important for future robust development.