"The Pandemic is a Lesson in Life"

Claudio de Sanctis has been passionate about the sea since he was a kid. The Head of Deutsche Bank’s new International Private Bank and CEO EMEA on the need for more ocean-based investments, the ambitions of the new division and weathering the coronavirus storm.

WERTE: Investing based on environmental, social and governance factors (ESG) generates great interest. What importance do you personally put on it?

Claudio de Sanctis: ESG is a defining topic for my generation. Anybody in a leadership function – whether in institutions, business or government – is being fundamentally shaped by the ESG movement in the way they do their job. But ESG is a very broad field and it’s hard to say one area is more important than the others. The conservation angle is very dear to me because I’ve always been passionate about this and in particular about ocean conservation.

Why ocean conservation over land conservation?

Both are incredibly important, but ocean conservation is currently seen as a lesser priority – and this needs to change. As a layman one doesn’t really get an understanding of all the environmental changes that happen under the beautiful blue surface of the ocean. The consequences of what is happening in the sea are even more far-reaching and relevant than what happens on land. The ocean is the lung of the planet and it is a huge source of economic livelihoods for billions of people, especially in developing countries.

How did you gain your understanding of the ocean’s perilous state?

I’m a passionate diver and I got an early start. As a kid growing up in Italy I spent much of the summer snorkelling and skin diving in the Mediterranean. That allowed me to form a strong connection with the sea. Since I’ve been independent, I’ve been diving in tropical and cold seas. I’ve witnessed the changes everywhere. The travels with my wife and three kids are always centred around nature and learning more – we are all avid divers.

Given the dearth of investment grade projects for ocean conservation, what role do you see Deutsche Bank playing?

Indeed, the ”Blue Economy“, which focuses on investment strategies to protect and restore the oceans, is not a very crowded area. Not many people in banking are talking about it because the linkage to financial investments is just emerging. Plus, the industry has a tendency to take care of what is current, not what will be current. That’s why I thought it would be a good idea for Deutsche Bank to position itself as a thought leader in an area that is becoming more important.

What does thought leadership of a bank look like in this burgeoning field?

It’s obviously not only about developing Blue Economy products. I would like us to be perceived as an institution that brings together the most relevant leaders in this space, to have regular discussions that our clients can benefit from and to hear what we do around ocean conservation.

Is there more pressure on banks to act due to the increasing recognition that ESG factors require adequate risk management?

We certainly view ESG not just as a topical trend for a specific group of investors. It is rather a systemic transformation, meaning that ESG criteria will help to understand how we are doing things and how to do them in line with environmental, social and governance factors.

Speaking of governance, Deutsche Bank garnered many negative headlines because of its dealings with undesirable clients. What internal controls are in place now to ensure that the bank’s code of ethical and moral conduct is followed?

Let me say first that it was a big mistake to onboard and keep a number of those clients. And whilst I think there’s still quite a lot of work to be done in our new International Private Bank, my predecessor and I in the Wealth Management global head role have done a lot to change the corporate culture and governance.

Will individuals whom you deem high-risk not be accepted as clients?

We have reviewed the entirety of our portfolio clients to make sure that there aren’t any big deviations between our risk appetite – what we’re comfortable with at the bank – and whom the client we back really is. Today we have a very different culture and a very different attention capability for these kinds of problems than we had a few years ago.

What drove the decision to form a new International Private Bank?

In IPB we bring together Wealth Management’s globally connected clients across Germany, Europe, the Americas, Asia and the Middle East and Africa, along with private clients and small and mediumsized enterprises in Italy, Spain, Belgium and India. The biggest driver on the private banking side is certainly the need for scale. We all recognise that scale in private banking is aconditio sine qua non to compete.

Is scale enough?

Though scale alone is not sufficient, without it you’re not even in the game. So it made sense to combine our international private banking businesses in countries like Italy, Spain, Belgium and India and Wealth Management to form the international private customer bank. Moreover, to keep two infrastructures and two management teams running in parallel in these geographies was an inefficiency we cannot afford to keep these days. We therefore leverage synergies, save money and create revenue potential. 

How do you differentiate IPB from your rivals?

Our ambition is to be the preeminent private bank for family entrepreneurs – in pretty much all the geographies where we commit. Where high networth clients and entrepreneurs are concerned, the primary driver of growth in wealth management today is lending, both to their companies and to entrepreneurs themselves. In Europe, obviously, it moves from that to being the preeminent private bank. In terms of size we’re pretty much already there. We’re larger than just about any other competitor when it comes to private banking assets in the EU 27 space.

Does IPB have a digital offering to help set it apart from the competition?

This is an area where we have some catching up to do. I think for IPB to aspire to differentiate ourselves digitally is very ambitious. And I think I’m known to be reasonably ambitious. So let’s be ambitious, but let’s also be honest and realistic. It’s a big goal for the next three to five years.

How will the cloud partnership Deutsche Bank signed with Google in July help with that?

We need radical and innovative measures like this partnership in order to catch up and go back to being competitive on the technology side.

Do you expect the bank to develop products with Google that you’ll be able to offer to clients?

I think there is a clear commitment from Google CEO Sundar Pichai to see us succeed in our digital transformation. They’re ready to invest with us. So, yes, I expect the partnership to be critical in terms of solutions we will bring to our clients. I would add that banks don’t get brownie points because they have a digital offering. We don’t get the client if we don’t have it.

Hopes for a sharp rebound from the coronavirus pandemic-induced recession quickly faded around the world. How do you view the economic outlook?

The economic consequences of this pandemic are yet to be fully understood, but I expect them to be extraordinary in nature and that is of significant concern. I can see how bad it will be in the developed world. I can only imagine how severely the reverberations of that will impact the developing world, on top of the direct impact of the pandemic. I believe we will know the size of the bill in the next three to five years and I expect it to be very material. 

How does Deutsche Bank weather the coronavirus storm while undergoing a massive overhaul?

The bank has gone through a very intense crisis management mode in the last few years and, incredibly, that helped. It’s a bit of a paradox but it’s true. The bank is certainly more prepared and better able right now to deal with a crisis than other financial institutions.

That‘s quite an optimistic view of a double whammy.

We have been a healing patient in a turnaround phase over the past year or two. But I think we’re fairly advanced. You never want to be hit by a major storm when you’re changing course. You want the boat to be aligned on the new course and then head into the storm – and that explains our sense of urgency and the necessity to make sure that we implement as much of that change and finish our transformation as quickly as possible before we really get hit by the economic consequences of the corona crisis. They are clearly delayed from the pandemic itself, especially when it comes to banks. But let’s not be fooled; that’s just the pause before the real big hit.

Are you concerned that the pandemic will affect your kids’ future?

I think this pandemic spread far and wide enough and is deadly enough to inculcate several generations with a fundamental respect for pandemic risks. In my opinion, this will lead society across the globe to prepare infinitely better for new and worse occurrences. So for my kids it’s first of all a lesson in life. Life should not always be easy. My hope is that it prepares them – and my generation which is running things at the moment – to manage a situation like this one far better in the future.

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This interview first appeared in our client magazine WERTE #22 - read further articles on www.werte.com.