Tuesday, 3 April 2007

Deutsche Bank braced for string of defections in Moscow

Financial News

Jason Corcoran and David Rothnie

02 Apr 2007

The defection by Deutsche Bank’s Russian rainmaker Nick Jordan to Lehman Brothers has rocked the German bank amid speculation of further raids on its Moscow operation.

Sources suggested Jordan’s exit last month could be the tipping point for other bankers to leave. Igor Lojevsky, head of sales and origination for Russia and the CIS, resigned last week to join Dresdner Kleinwort in Moscow.

A team of bankers is believed to be following Jordan to Lehman, and his co-head of investment banking, Ilya Sherbovich, whose contract expires next year, is said to be negotiating his departure.
Charlie Ryan, chief country officer and chief executive of Deutsche Bank Russia, admitted more bankers would probably join Lehman but said this allowed the next layer of bankers to step up.

“We make sure we are orchestrating people’s career paths and this allows the next row to move up. I am privately proud at how well my former protégées are doing elsewhere,” he said.

With the exception of Sherbovich, market sources say Deutsche, which bought the remaining 60% of United Financial Group it did not own last year, has underpaid its bankers by as much as 50% since it took full control of UFG.

However Ryan, a founder of UFG, said it was “categorically untrue” that bankers were not paid competitive market rates. He said: “I was a benign dictator at UFG in consultation with some colleagues. This has not changed starkly although there is still some input from Deutsche on certain compensation issues.”

A former Deutsche banker said the culture of entrepreneurialism fostered at UFG had changed drastically in the past two years. He said: “Deutsche Bank is a large institution. UFG is much smaller and a different animal with very different payout ratios. Smaller institutions need to pay out much more in Moscow because of the higher risk premium involved in working there.”

Deutsche’s research team in Moscow has also been hit. Its co-head of research, Stephen O’Sullivan, left last month for Macquarie Bank’s Asian team.

Derek Weaving, former head of Deutsche’s Russian utilities research business, has joined rival Renaissance in a similar job, having left almost a year ago while former chief strategist Christopher Granville is editing an emerging markets intelligence service.

A Moscow analyst said: “Its research team is losing its way. O’Sullivan and Granville going were big blows. Alexis Zabotkin is in the only recognised strategist it has left.”

Deutsche, which employs more than 800 people in Moscow, made a strong showing in the Russian investment banking league tables last year, topping the rankings for mergers and acquisitions advisory work and coming second in the league table of underwriters of domestic corporate bonds, according to data provider Cbonds.

Deutsche is primed to take part in the imminent $2bn (€1.5bn) flotation of state-owned Vneshtorgbank and was last week named as one of the underwriters of an initial public offering by Russian insurance group RESO-Garantia.

Deutsche and Goldman managed last week’s $2.5bn share offer by power utility OGK-3.


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