Bankers Trust

from Wikipedia, the free encyclopedia

The Bankers Trust Company was founded in New York City in 1903 as an asset management company (Trust Company) under the leadership of JP Morgan by several banks that were unable to carry out this activity themselves due to legal restrictions.

In the course of an eventful history, the company had grown to become the eighth largest bank in the USA by the mid-1990s and had its focus on investment banking when it was taken over by Deutsche Bank on June 4, 1999 and integrated into the Deutsche Bank Group. The company itself was continued as a special institute for asset management (private banking) under the name Deutsche Bank Trust Company Americas.

In Australia , the investment activities of Bankers Trust were spun off (management buyout) and three years later sold to the Australian Westpac . Since then, this area has been active in the market as the investment division of the Australian bank under the name BT Financial Group.

Due to the regional banking principle in the USA, there are a number of institutions in other states with the name or part of their name Bankers Trust, but none of them have acquired the same meaning. The Internet address bankerstrust.com is located at a local bank of the same name founded in 1917 in Des Moines , Iowa .

history

The company was incorporated on March 24, 1903. The starting capital was $ 1.5 million. JP Morgan was the leading partner. The first president was former steel manager Edmund C. Converse, who was also president of Liberty National Bank. The bank opened its business on March 30th on Liberty Street with eight employees, but moved to Wall Street after four months due to a very successful start to business . In addition to asset management, the company soon had success issuing travelers checks for the American Bankers Association from 1907 onwards.

A growth spurt resulted from the acquisition of Mercantile Trust Company (1911) and Manhattan Trust Company (1912). After these acquisitions , assets under management reached $ 150 million and equity reached $ 20 million. The company moved into the newly constructed Bankers Trust Building , but only occupied three floors there.

With the establishment of the Federal Reserve System from 1914 on, commercial banks were also allowed to manage assets. Due to the loss of its competitive advantage, Bankers Trust's activities were in turn expanded to include banking. Because of the weak position in the private customer business, efforts were made in the 1920s to expand the investment banking sector. The focus was on issuing and trading bonds and stocks . An international position has also been established with offices in Paris (1920) and London (1922).

After the Second World War, several acquisitions led to further business expansions, which also included private customer business. In 1959, the attempt to take over Manufacturers Trust Company failed due to the approval of the regulatory authorities. To expand the business, several smaller commercial banks as well as special institutes for factoring, leasing and the mortgage business were acquired in the 1960s. The bank was hit hard by the recession resulting from the oil crisis in the early 1970s, particularly in the real estate sector. At the end of the 1970s, it was considered the weakest in terms of earnings among the major American banks.

This changed when the decision was made to focus more on investment banking again. The new strategy was carried out by Charles S. Sanford, the company's new CEO since the mid-1980s . This had already attracted attention in 1975 when he refused to give the city of New York any new loans without restructuring its finances due to excessive indebtedness. With the new orientation, retail banking was sold. Instead, they strengthened transaction banking, which became one of the foundations of the turnaround . Above all, Sanford developed a system for evaluating risks and the related return requirements for investments with higher risks ( RAROC - risk-adjusted return on capital). The method of risk-weighted capital backing for investments has subsequently been adopted throughout the industry. Deutsche Bank switched its risk management to RAROC in 1995/96 . With this control of their investments, Bankers Trust was able to enter the innovative derivatives business at an early stage. In contrast, the loan book fell significantly. In the early 1990s, Bankers Trust was once again seen as a successful and profitable investment bank. In addition to derivatives , it was also known for issuing high-yield bonds and issues in the Neuer Markt .

Takeover by Deutsche Bank

The new capabilities of Bankers Trust had already been recognized in 1994 by Hilmar Kopper . In an effort to expand the position in investment banking achieved with Morgan Grenfell in London, they were looking for a suitable partner in the USA, where Deutsche Bank was too weak to compete against the large American institutions.

At Bankers Trust, Sanford resigned as planned in 1996 and was replaced by Frank Neil Newman (United States Deputy Treasury Secretary, 1994 from 1995). The second half of the 1990s was marked by ups and downs for the bank. In 1994 it received an award for Bank of the Year in the field of derivatives. In the same year there was a dispute with several important customers. The processes with Gibson Greetings and Procter & Gamble could only be eliminated with expensive comparisons. In 1995 there were significant problems with credit in Latin America. In a departure from Sanford's strategy, Newman nevertheless opted for an expansion of the loan portfolio in emerging markets and the bank was subsequently hit hard by the financial crises in Russia and Asia . Despite the successful takeover of the well-known merchant bank Alex. Brown made several takeover offers in 1998.

Compared to American competitions, Deutsche Bank was an attractive acquirer for the management of Bankers Trust because of the relatively low overlap . When it was taken over, Bankers Trust had around 20,000 employees, 12,000 of them in the United States. At this point in time, Deutsche Bank had around 4,000 employees in the USA (total: over 70,000). There was also greater overlap in London and Australia.

After a due diligence phase in November 1998, the intended takeover was published on November 24, 1998. The offer was for $ 93 per share. Bankers Trust shares peaked at $ 133 last year and fell below $ 70 as a result of the Asian crisis. In November there was already speculation on a takeover and the price on the day before publication was $ 77.50. On the day of the announcement, it jumped to $ 84.50. The clear distance to the takeover rate was a sign that considerable problems were expected with the approval.

Deutsche Bank's share price fell by 5% at the same time, a sign of the skepticism with which the merger and the purchase price were taken. For Deutsche Bank, the takeover meant a significant shift in its focus. The public feared a similarly difficult and protracted integration phase as it had already taken place with the takeover of Morgan Grenfell (1989). Above all, the cultural differences were pointed out. The judgment of Rolf-E. Breuer , the spokesman for the board of Deutsche Bank, was very different:

“We have made good progress on our way to becoming a global financial services provider with this acquisition. Deutsche Bank - or any non-American bank - has never been in a comparable position in the United States. For the first time, the strength and network of a European universal bank are combined with the special skills and experience of a large, broad-based institute in the USA. There is no precedent for this transaction. We have to set a new standard. "

Approval by the supervisory bodies of both banks took place on November 30, 1998. After approval by the regulatory authorities and approval of the general meetings, Deutsche Bank completed this transaction on June 4, 1999 (Closing Day) with a total value of approximately $ 9 billion (16.9 billion DM) as planned. The integration had already been prepared in the time leading up to the Closing Day. The composition of the top integration team is remarkable. It was headed by Josef Ackermann , who had only been with Deutsche Bank since 1996. While the American side was represented by Frank Newman and two other managers from Bankers Trust, Deutsche Bank's side was Edson Mitchell and Michael Philipp, two London investment bankers who had also only recently started working for the bank. This is mainly because the measures to leverage synergies involved a reduction in staff of more than 4,000 people, most of which affected the London and New York locations. By the end of 1999, the main steps to incorporate Bankers Trust had already been taken.

In terms of corporate law, Bankers Trust continues to exist in Deutsche Bank Trust Company Americas and, at the end of 2008, has around 1500 employees in asset management (private banking). It had $ 50 billion in total assets and $ 150 billion in assets under management.

Individual evidence

  1. ^ The battle plans of Hilmar Kopper, Euromoney, January 1994, 28-44
  2. ^ Press conference on November 30, 1998, quoted from: Christopher Kobrak: Die Deutsche Bank und die USA, Beck, Munich 2008, 460
  3. ↑ Deutsche Bank: A Speech for Everyone. In: Manager Magazin . June 4, 1999, accessed August 15, 2017 .
  4. ^ Deutsche Bank Trust Company Americas. In: usbanklocations.com. 2017, accessed on August 15, 2017 .

literature

  • Bankers Trust: The Five Decades of Bankers Trust Company. 1903-1953 . Self-published, New York NY 1953.
  • Christopher Kobrak: Deutsche Bank and the USA . Beck, Munich 2008, ISBN 978-3-406-57068-1 , Chapter 17, pp. 460-486.
  • Manfred Timmermann : Bank Mergers: Two Case Studies . In: Wolfgang Franz , Hans Jürgen Ramsen, Manfred Stadler (eds.): Fusions . Mohr Siebeck, Tübingen 2002, ISBN 3-16-147761-8 , ( Economics Seminar Ottobeuren 31), (Papers from the 31st Economics Seminar from September 16 to 19, 2001), pp. 73–110.

Web links