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January 29, 2006 10:20 pm

DrKW denies sweeping job cuts

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The man charged with combining investment bank Dresdner Kleinwort Wasserstein with Dresdner Bank?s corporate lending operations has dismissed rumours of up to 3,000 redundancies at DrKW, insisting there will be minimal job cuts.

In his first interview since taking up the post, Stefan Jentzsch, previously at Munich-based HVB, said: ?There will be hardly any job losses.?

?There?s not much of an overlap,? he added.

Instead, cuts seem likely to hit Dresdner?s retail bank. Mr Jentzsch said profitability should rise by a third by 2009, setting a pre-tax return on equity target for the combined corporate and investment bank of ?20 per cent within two to three years?.

Since insurance group Allianz bought Germany?s third biggest bank for ?23bn five years ago, Dresdner?s corporate bank has excelled but DrKW, though back in profit, remains underperforming, especially in corporate finance where it has lost ground in league tables.

In November, DrKW?s London-based chief executive, Andrew Pisker, was ousted and Frankfurt-based Mr Jentzsch was installed to merge the corporate and investment bank.

Mr Jentzsch said DrKW?s weakness ? reflected in a cost-income ratio of 90 per cent-plus and a return on equity in single digits ? could not be blamed on faults in structure or market presence. ?The problem is not so much what we do or don?t do, rather it?s the way we do it. People have operated in silos. There?s this ridiculous London-Frankfurt rivalry. The client [should be] at the centre of our activities.?

After strategy meetings with top staff in New York this month, Mr Jentzsch seems to have concluded that DrKW should not withdraw wholesale from any markets. At most, certain peripheral locations could be closed.

Recently, many bankers have been braced for a shift away from corporate finance.

But Mr Jentzsch dismissed this notion, too. ?At a time when we expect more corporate action in M&A and primary equities, it would be pretty foolish to scale back corporate finance,? he said. The business absorbs only 5 per cent of DrKW?s ?2bn capital pool, but generates more than 10 per cent of revenues. ?This proportion will go up rather than down.?

Germany offered the biggest growth potential, Mr Jentzsch said, through the cross-selling of investment banking products to neglected corporate bank clients.

But he refused to be drawn on whether his top three executives ? Steve Bellotti, head of capital markets, and the co-heads of corporate finance, Don Meltzer and Joe Dryer, none of whom is Frankfurt-based ? were the right men to champion this drive.

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