Deutsche Bank AG

Deutsche Bank AG (, ) is a German multinational investment bank and financial services company headquartered in Frankfurt, Germany, and dual-listed on the Frankfurt Stock Exchange and the New York Stock Exchange.

Deutsche Bank was founded in 1870 in Berlin. From 1929 to 1937, following its merger with Disconto-Gesellschaft, it was known as ''Deutsche Bank und Disconto-Gesellschaft'' or DeDi-Bank. Other transformative acquisitions have included those of Mendelssohn & Co. in 1938, Morgan Grenfell in 1990, Bankers Trust in 1998, and Deutsche Postbank in 2010.

As of 2018, the bank's network spanned 58 countries with a large presence in Europe, the Americas, and Asia. It is a component of the DAX stock market index and is often referred to as the largest German banking institution, with Deutsche Bank holding the majority stake in DWS Group for combined assets of 2.2 trillion euros, rivaling even Sparkassen-Finanzgruppe in terms of combined assets, forming Europe´s 4th biggest asset management firm.

Deutsche Bank has been designated a global systemically important bank by the Financial Stability Board since 2011. It has been designated as a Significant Institution since the entry into force of European Banking Supervision in late 2014, and as a consequence is directly supervised by the European Central Bank.

According to a 2020 article in the ''New Yorker'', Deutsche Bank had long had an "abject" reputation among major banks, as it has been involved in major scandals across various issue areas.

History

1870–1933

Deutsche Bank was founded in 1870 in Berlin as a specialist bank for financing foreign trade and promoting German exports. It subsequently played a large part in developing Germany's financial services industry, as its business model focused on providing finance to industrial customers. The bank's statute was adopted on 22 January 1870, and on 10 March 1870 the Prussian government granted it a banking license. The statute laid great stress on foreign business: Prior to the founding of Deutsche Bank, German importers and exporters were dependent upon British and French banking institutions in the world markets—a serious handicap in that German bills were almost unknown in international commerce, generally disliked and subject to a higher rate of a discount than English or French bills.

The founding members were: Hermann Zwicker (Bankhaus Gebr. Schickler, Berlin); Anton Adelssen (Bankhaus Adelssen & Co., Berlin); Adelbert Delbrück (Bankhaus Delbrück, Leo & Co.); Heinrich von Hardt (Hardt & Co., Berlin, New York); Ludwig Bamberger (politician, former chairman of Bischoffsheim, Goldschmidt & Co); Victor Freiherr von Magnus (Bankhaus F. Mart Magnus); (Bankhaus Deichmann & Co., Cologne); Gustav Kutter (Bankhaus Gebrüder Sulzbach, Frankfurt); and Gustav Müller (Württembergische Vereinsbank, Stuttgart). The First directors were Wilhelm Platenius, Georg Siemens, and Hermann Wallich. Georg Siemens was a son of a cousin of Werner von Siemens. The bank initially operated from the first floor of a building at 21 Französische Strasse, then in 1871 moved to premises near the Berlin Stock Exchange, and in 1876 started building its massive head office complex on Mauerstrasse.

The bank's first domestic branches, inaugurated in 1871 and 1872, were opened in Bremen and Hamburg. Its first overseas offices opened in Shanghai and Yokohama in 1872, and London in 1873, followed by South American offices between 1874 and 1886. The branch opening in London, after one failure and another partially successful attempt, was a prime necessity for the establishment of credit for the German trade in what was then the world's money center. Deutsche Bank also took advantage of the Panic of 1873 by taking over a number of banks in liquidation, including the Berlin-based which had itself consolidated a number of failed banks in the early 1870s.

Major projects in the early years of the bank included the Northern Pacific Railroad in the US and the Baghdad Railway (1888). In Germany, the bank was instrumental in the financing of bond offerings of steel company Krupp (1879) and introduced the chemical company Bayer to the Berlin stock market.

The second half of the 1890s saw the beginning of a new period of expansion at Deutsche Bank. The bank formed alliances with large regional banks, giving itself an entry into Germany's main industrial regions. It thus formed community-of-interests partnerships with in Elberfeld and in Breslau, linked to the fast-growing industrial economies of the Rhineland and Silesia respectively; it eventually acquired the two banks in 1914 and 1917 respectively. Joint ventures were symptomatic of the concentration then under way in the German banking industry. For Deutsche Bank, domestic branches of its own were still something of a rarity at the time; the Frankfurt branch dated from 1886 and the Munich branch from 1892, while further branches were established in Dresden and Leipzig in 1901.

In 1889, Deutsche Bank participated in the creation of the Deutsch-Asiatische Bank in Shanghai, in 1894, of the Banca Commerciale Italiana in Milan, and in 1898, of the Banque Internationale de Bruxelles.

In addition, the bank rapidly perceived the value of specialist institutions for the promotion of foreign business. Gentle pressure from the Foreign Ministry played a part in the establishment of Deutsche Überseeische Bank in 1886 and the stake taken in the newly established Deutsch-Asiatische Bank three years later, but the success of those companies showed that their existence made sound commercial sense. By end-1908, Deutsche was by far the largest German joint-stock bank by total deposits, with a total of 489 million Marks ahead of Dresdner Bank (225 million), Disconto-Gesellschaft (219 million), Darmstädter Bank (109 million) and A. Schaaffhausen'scher Bankverein (72 million). At that time, Deutsche Bank was referred to as one of the four "D-Banks" (all of which had names starting with a D) that dominated German commercial banking, together with Darmstädter Bank, Disconto-Gesellschaft, and Dresdner Bank.

During World War I and in its immediate aftermath, the operations of Deutsche Bank in Brussels, London, Tokyo and Yokohama were expropriated; conversely, its activity in the Ottoman Empire expanded considerably, and it greatly expanded its footprint in Germany. In 1919, the bank purchased the state's share of Universum Film Aktiengesellschaft ( UFA). In 1926, the bank assisted in the merger of Daimler and Benz.

The bank merged with Disconto-Gesellschaft in 1929 and rebranded itself Deutsche Bank und Disconto-Gesellschaft, sometimes referred to as DeDi-Bank. By 1930, Deutsche Bank & Disconto-Gesellschaft maintained a similar dominant position as before World War I, with 4.8 billion Reichsmarks in total deposits ahead of Danat-Bank (2.4 billion), Dresdner Bank (2.3 billion), Commerz- und Privatbank (1.5 billion), Reichs-Kredit-Gesellschaft (619 million), and Berliner Handels-Gesellschaft (412 million).

In the crisis summer of 1931 the Deutsche Golddiskontbank, a subsidiary of the Reichsbank, acquired 35 percent of DeDi-Bank's equity as part of a sector-wide rescue, bringing total government ownership of the bank to 38.5 percent. This did not, however, result in significant government interference in the management of the company, unlike at Dresdner Bank whose capital was near-completely nationalized.

1933–1945

When Adolf Hitler became leader of Germany, Deutsche Bank increasingly became integrated into the Nazi power structures, and fully implemented the Nazi policy of aryanization. In 1934 it dismissed its three Jewish management board members, Oscar Wassermann, Theodor Frank, and Georg Solmssen; in 1938 it dismissed its last Jewish supervisory board member. By the end of 1938, it had been involved as an intermediary and lender in at least 363 cases of expropriation of Jewish-owned businesses. In 1938, it acquired Jewish-controlled German bank Mendelssohn & Co. under duress. Meanwhile, the Nazi government fully re-privatized Deutsche Bank in 1935–1937, largely out of budgetary considerations. Its name changed back to Deutsche Bank in 1937.

While the Nazi policies of financial repression were largely unhelpful to the domestic business of Deutsche and other German commercial banks, its expansionary behavior created opportunities that Deutsche Bank pursued. In 1938 following Hitler's Anschluss of Austria, Deutsche Bank gradually took control of Creditanstalt-Bankverein, the former country's leading bank. On the latter was coerced to enter a "friendship agreement" with Deutsche Bank, by which the latter secured a presence in its board of directors. Creditanstalt executive Louis de Rothschild was immediately arrested and imprisoned, deprived of his position and property, then released upon payment of $21,000,000, believed to have been the largest bail bond in history for any individual, and migrated to the U.S. in 1939 after more than one year in custody. Later in 1938, Creditanstalt was jointly taken over, without compensation, by German government holding , Deutsche Bank, and the Reichsbank, which held respectively 51 percent, 25 percent, and 12 percent of its capital. In April 1942, Deutsche Bank raised its ownership to 51 percent by acquiring a block of shares from VIAG. During wartime, the Creditanstalt expanded its operations into Nazi-occupied Czechoslovakia, Poland, Yugoslavia, and in Nazi-allied Bulgaria.

In September 1938, following the Munich Agreement, Deutsche Bank took over the branches of Prague-based Böhmische Union Bank (BUB) in the Sudetenland. In March 1939, it forcibly took over control of the BUB itself, in which it built a majority stake complemented with prior shareholding of Creditanstalt. It also took over management control of the National Bank of Greece during the Axis occupation of Greece, without however acquiring ownership out of consideration for Italian sensitivities. Through the Creditanstalt-Bankverein, Deutsche Bank also became a major shareholder of the (AJB), which had been formed in 1928 from the two former branches of the Wiener Bankverein in Belgrade and Zagreb, and of the Landesbank für Bosnien und Herzegowina in Sarajevo, together with the Société Générale de Belgique and its affiliate Banque Belge pour l'Étranger. In 1940, following the German invasion of Belgium, Deutsche Bank bought out the Belgian stake under duress and became the AJB's dominant shareholder, with 88 percent held either directly or through Creditanstalt. Deutsche Bank simultaneously took control of the Landesbank in Sarajevo. Following the German invasion of Yugoslavia, the AJB was divided into two separate institutions, respectively the in occupied Serbia, and the in the Independent State of Croatia. Both these banks' assets were eventually confiscated by the newly established Communist authorities in October 1944, and they were subsequently liquidated.

During the war, Deutsche Bank provided banking facilities for the Gestapo and, through its branch in Katowice, loaned the funds used to build the Auschwitz camp and the nearby IG Farben facilities. Deutsche Bank publicly acknowledged its involvement at Auschwitz in 1999. It also was a principal participant in the Nazi regime's gold transactions. Between 1942 and 1944, Deutsche Bank purchased 4,446 kg of gold from the Reichsbank, of which 744 kg came from Holocaust victims.

In an effort to come to terms with its past during the Nazi era, Deutsche Bank in 1995 published a history volume that detailed its entanglement with the dictatorship. In December 1999, along with other major German companies, Deutsche Bank contributed to a US$5.2 billion compensation fund following lawsuits brought by Holocaust survivors; U.S. officials had reportedly threatened to block Deutsche Bank's $10 billion purchase of Bankers Trust if it did not contribute to the fund.

1945–2000

Following Germany's defeat in World War II, the Allied authorities, in 1948, ordered Deutsche Bank's break-up into regional banks. These regional banks were later consolidated into three major banks in 1952: Norddeutsche Bank AG; Süddeutsche Bank AG; and Rheinisch-Westfälische Bank AG. In 1957, these three banks merged to form Deutsche Bank AG with its headquarters in Frankfurt.

In 1959, the bank entered retail banking by introducing small personal loans. In the 1970s, the bank pushed ahead with international expansion, opening new offices in new locations, such as Milan (1977), Moscow, London, Paris, and Tokyo. In the 1980s, this continued when the bank paid U$603 million in 1986 to acquire Banca d'America e d'Italia.

In 1972, the bank established its ''Fiduciary Services Division'' which provides support to its private wealth division.

At 8:30 am on 30 November 1989, Alfred Herrhausen, chairman of Deutsche Bank, was killed when a car that he was in exploded while he was traveling in the Frankfurt suburb of Bad Homburg. The Red Army Faction claimed responsibility for the blast.

In 1989, the first steps towards creating a significant investment-banking presence were taken with the acquisition of Morgan, Grenfell & Co., a UK-based investment bank which was renamed Deutsche Morgan Grenfell in 1994. In 1995 to greatly expand into international investments and money management, Deutsche Bank hired Edson Mitchell, a risk specialist from Merrill Lynch, who hired two other former Merrill Lynch risk specialists Anshu Jain and William S. Broeksmit. In the year 1991 the majority of the deposit-taking business (especially corporate and retail banking), as well as a number of branch buildings and locations, were taken from the Deutsche Kreditbank together with the Dresdner Bank in the course of the currency union, and ran until 1993 under Dresdner Bank Kreditbank AG and Deutsche Bank Kreditbank AG until 1994.

By the mid-1990s, the buildup of a capital-markets operation had got underway with the arrival of a number of high-profile figures from major competitors. Ten years after the acquisition of Morgan Grenfell, the US firm Bankers Trust was added. Bankers Trust suffered losses during the 1998 Russian financial crisis since it had a large position in Russian government bonds, but avoided financial collapse by being acquired by Deutsche Bank for $10 billion in November 1998. On 4 June 1999, Deutsche Bank merged its Deutsche Morgan Grenfell and Bankers Trust to became Deutsche Asset Management (DAM) with Robert Smith as the CEO. This made Deutsche Bank the fourth-largest money management firm in the world after UBS, Fidelity Investments, and the Japanese post office's life insurance fund. At the time, Deutsche Bank owned a 12% stake in DaimlerChrysler but United States banking laws prohibit banks from owning industrial companies, so Deutsche Bank received an exception to this prohibition through 1978 legislation from Congress.

Deutsche continued to build up its presence in Italy with the acquisition in 1993 of Banca Popolare di Lecco from Banca Popolare di Novara for about $476 million. In 1999, it acquired a minority interest in Cassa di Risparmio di Asti.

21st century

In the 11 September 2001 terrorist attacks, the Deutsche Bank Building in Lower Manhattan, formerly Bankers Trust Plaza, was heavily damaged by the collapse of the South Tower of the World Trade Center. Demolition work on the 39-story building continued for nearly a decade, and was completed in early 2011.

In October 2001, Deutsche Bank was listed on the New York Stock Exchange. This was the first NYSE listing after interruption due to 11 September attacks. The following year, Josef Ackermann became CEO of Deutsche Bank and served as CEO until 2012 when he became involved with the Bank of Cyprus. Then, beginning in 2002, Deutsche Bank strengthened its U.S. presence when it purchased Scudder Investments. Meanwhile, in Europe, Deutsche Bank increased its private-banking business by acquiring Rued Blass & Cie (2002) and the Russian investment bank United Financial Group (2005) founded by the United States banker Charles Ryan and the Russian official Boris Fyodorov which followed Anshu Jain's aggressive expansion to gain strong relationships with state partners in Russia. Jain persuaded Ryan to remain with Deutsche Bank at its new Russian offices and later, in April 2007, sent the president and chairman of the management board of VTB Bank Andrey Kostin's son Andrey to Deutsche Bank's Moscow office. Later, in 2008, to establish VTB Capital, numerous bankers from Deutsche Bank's Moscow office were hired by VTB Capital. In Germany, further acquisitions of Norisbank, Berliner Bank and Deutsche Postbank strengthened Deutsche Bank's retail offering in its home market. This series of acquisitions was closely aligned with the bank's strategy of bolt-on acquisitions in preference to so-called "transformational" mergers. These formed part of an overall growth strategy that also targeted a sustainable 25% return on equity, something the bank achieved in 2005.

On 1 October 2003, Deutsche Bank and Dresdner Bank entered into a payment transaction agreement with Postbank to have Postbank process payments as the clearing center for the three banks.

Since the mid-1990s Deutsche Bank commercial real estate division offered Donald Trump financial backing, even though in the early 1990s Citibank, Manufacturers Hanover, Chemical, Bankers Trust, and 68 other entities refused to financially support him.

In 2008, Trump sued Deutsche Bank for $3 billion and a few years later, he shifted his financial portfolio from the investment banking division to Deutsche Bank private wealth division with Rosemary Vrablic, formerly of Citigroup, Bank of America, and Merrill Lynch, becoming Trump's new personal banker at Deutsche Bank.

In 2007, the company's headquarters, the Deutsche Bank Twin Towers building, was extensively renovated for three years, certified LEED Platinum and DGNB Gold.

In 2010, the bank developed and owned the Cosmopolitan of Las Vegas, after the casino's original developer defaulted on its borrowings. Deutsche Bank ran it at a loss until its sale in May 2014. The bank's exposure at the time of sale was more than $4 billion, and sold the property to Blackstone Group for $1.73 billion.

Housing credit bubble and CDO market

On 3 January 2014, it was reported that Deutsche Bank would settle a lawsuit brought by US shareholders, who had accused the bank of bundling and selling bad real estate loans before the 2008 downturn. This settlement came subsequent and in addition to Deutsche's $1.93 billion settlement with the US Housing Finance Agency over similar litigation related to the sale of mortgage-backed securities to Fannie Mae and Freddie Mac