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Deutsche could hit equity ops
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October 20, 1998: 12:07 p.m. ET
Talk of merging Deutsche Bank and Bankers Trust causes jitters in London
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LONDON (CNNfn) - Deutsche Bank's securities operations could be in store for a major shake-up if it achieves its reported goal of acquiring US investment house Bankers Trust.
Deutsche would be keen to integrate BT's Alex Brown securities house, which contains the former NatWest Securities, to strengthen its European equities team. BT would also give Deutsche a U.S. securities operation.
John Leonard, banking analyst at Salomon Smith Barney, said Deutsche "may take the opportunity to bring in some new management blood."
Deutsche is widely perceived as having failed to successfully integrate Morgan Grenfell, its securities house.
Mr Leonard said both banks needed to diversify their diversify their operations to insulate them from the banking ratings agencies.
Derek Chambers, banking analyst at HSBC James Capel, said the move was sensible given long-term structural changes taking place in the sector: "European banks need to strengthen their investment banking skills."
European banks lag behind their U.S. counterparts, with a smaller proportion of their income originating in securities and bond issues, he said. Seventy percent of U.S. banks' corporate earnings are from such issues.
Other analysts were more skeptical. Tetsuaki Iwamoto of Daiwa Europe said Deutsche's interest was purely opportunistic and there was no rationale to the deal beyond the BT's low valuation.
"It's unrealistic for any German bank to join up with an American bank because their cultures are so different. I was more impressed by Deutsche's plans to become a pan European entity."
However, Mr Iwamoto warned that if the banking sector regained its strength in a year's time, the merged group could experience staff defections. Deutsche's centralized culture is at odds with BT's reputation for entrepreneurial flair.
Mr Iwamoto added that it was a good opportunity for BT shareholders to exit their investment when the trend for BT looked to be heading downwards.
Rumors frequently link Deutsche Bank with J.P. Morgan, the U.S. investment bank. But analysts said deals between any of Deutsche Bank, Paribas of France, Lehman Brothers of the U.S. and Germany's Dresdner Bank were plausible.
Deutsche Bank declined to comment on the Financial Times newspaper report which earlier linked it to Bankers Trust and said it would not be commenting today. Spokesmen for Bankers Trust were unavailable for comment. 
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