Throughout the course of 2006, Deutsche Bank has been the clear market leader in the EUR290 billion German retail derivatives industry, impressively maintaining a 20% market share, according to turnover statistics from BOGA, Deutsche Borse's exchange settlement system. By the start of October this year, the bank had traded more than EUR20 billion of certificates, EUR45 billion of retail derivatives and EUR22 billion of geared products such as plain vanilla warrants and knock-out certificates.
Deutsche Bank offers a range of 14,000 products, of which as many as 6,000 are warrant-type leveraged products. The remainder are investment-type issues, such as discount and bonus certificates linked to various global indexes and stocks. "We aim to be a one-stop shop," says Stefan Armbruster, director, certificates and warrants structuring and marketing at Deutsche Bank in Frankfurt.
Equity-linked products that contain a risk buffer have been the big theme of the year. "These certificates have been the bestsellers because people want downside protection and active involvement in the equity performance, even if participation in the upside is restricted," he says.
Demand for the bank's Express products, introduced last year, has been phenomenal, with around 70% of the maturing products being reinvested.
Express products contain an embedded risk buffer, making them perfect for investors who expect narrowly range-bound markets, and providing attractive - though limited - returns in a tax-efficient manner. The Bonus certificate, meanwhile, gives buyers additional reward if the underlying performs strongly and the risk barrier is not met. Moreover, the Reverse Bonus certificate enables clients to profit from declining markets.
The bank has completed 18 trades of up to EUR2 billion of its Swing certificates, which have a bull-bear structure that enables buyers to benefit from either rising or falling markets. Swing certificates effectively provide a volatility play with a capital guarantee.
One type of product absent from other German banks' armoury is the Combi Express, which is a combination of a basket of five stocks and an index in auto-callable format. Armbruster says the bank is always looking for diverse payoff structures, such as its commodity note with a step-up bonus. Again, no other bank offers such a structure. "We are a big player in this business and are able to stay one step ahead of the market. Deutsche Bank has access to new products and markets, providing core ideas for investment that are very well received by clients," he says.
Deutsche's pioneering approach means the bank can tailor certificates with exposure to markets that German clients would not otherwise have. For example, the bank launched the only certificates linked to Dubai and Vietnamese stocks, and was the first bank to introduce a product on Turkish real-estate investment trusts.
The firm has an array of distribution channels, ranging from savings and private banks, internet and discount brokers, to exchanges and direct sales to the public. Most Deutsche Bank products are delivered via its internal network of branches and retail outlets, with third-party distribution accounting for roughly 20%.
Deutsche's online brokerage service platform, Maxblue, is the fourth largest in Germany, linking 12 online discount brokers via the bank's integrated trading and routing system Xavex Online.
With so many new and existing products on offer, Deutsche's line of communication to clients nonetheless remains strong. "The most important thing is not to be misleading or overly technical. It's vital to be totally transparent and make products that are transparent," he adds.
The bank is also gaining more visibility within its distribution channels. Whereas major German distributors such as Stadtsparkasse may have previously put their own name on Deutsche's manufactured products, the trend now is towards a combined marketing effort.
WHY DEUTSCHE BANK WON
Deutsche Bank is the one-stop shop for structured products in Germany. Its structuring prowess means that the bank is able to distribute some of the most interesting products seen in the market.