Tuesday, 3 April 2007

Deutsche Bank battles Russia defections

Financial News

David Rothnie and Jason Corcoran in Moscow

02 April 2007

Deutsche Bank is revamping the leadership of its Russian investment banking operation after suffering further defections in the scramble to secure top talent.

Several executives have left and more departures are expected, including that of Ilya Sherbovich, its co-head in Moscow.

He is a co-founder of UFG, the Russian securities brokerage that Deutsche Bank bought in a two-step deal for $700m (€523m). The German bank acquired 40% of UFG in 2003 and the remainder last year.

The acquisition established Deutsche as the leading foreign bank in Moscow, where it employs 700 people and has strong links with big companies, such as energy group Gazprom, but it has also made it a prime target in the battle for talent in Russia’s booming capital markets.

Last week, Igor Lojevsky, a derivatives specialist at Deutsche UFG, left for Dresdner Kleinwort, while last month Lehman Brothers hired Nick Jordan, Deutsche’s co-head of Russian investment banking, to spearhead its return to the fast-growing but risky market.

Goldman Sachs and UBS have also suffered hiring raids from local banks, which are forcing up rates of pay for top rainmakers. Last week, Renaissance Capital hired Gordon McCulloch from Goldman, while last month Alfa Bank lured Ed Kaufmann from UBS. More than 30 senior bankers have been recruited from rivals in the past six months.

Charles Ryan, chief country officer and chief executive of Deutsche Bank in Russia, said the Moscow hiring spree “resembled a French farce”.

He added: “I have seen this movie before. Moscow is not a get-rich scheme, because you need to have all the pieces of infrastructure in place like we do. A lot of our competitors are becoming increasingly desperate because they can’t achieve scale. They are planning tennis without a net.”

Sherbovich, UFG’s third-largest shareholder with a stake of between 15% and 20% behind co-founders Ryan and Boris Fyodorov, is understood to negotiating the terms of his departure that could see him walk away with more than $200m in stock and compensation.

Moscow banking sources said Sherbovich has informed Deutsche of his plans to leave, which the bank has denied.

Ryan said: “Ilya is not leaving. We both have contracts to 2008 and we are going to start thinking about succession and internal planning.”

Jordan’s departure has forced Deutsche Bank to rethink its plans to groom a successor to Sherbovich. Banking sources said it may turn to Philip Southwell, an equity capital markets banker who has held a variety of roles, but Andrew Chulack, head of central and eastern Europe, has also been mentioned as a candidate.


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