Thanks, but no thanks: Investment banks cull clients

Tue Nov 17, 2015 9:53am EST
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By Steve Slater

LONDON (Reuters) - Bank customers. They aren't what they used to be.

That at least is the message coming out from investment banks, who say they want to cut the number of clients they have because a lot of them aren't profitable.

At many investment banks the top 100 clients can account for 40 percent of revenues and the top 1,000 may contribute more than 80 percent of income, leaving thousands of smaller customers who contribute little revenue but suck up resources and capital.

"A major challenge is finding a way to reprice or find a cheaper operating model for a long tail of smaller clients," said Roger Rudisuli, a partner in McKinsey's corporate and investment banking practice in New York.

Investment banks are taking a more forensic and hard-nosed approach to clients - typically small and large companies - due to a more difficult trading, economic and regulatory landscape and a shift from an obsession with revenues to profitability. It is prompting firms to cut customers loose.

Deutsche Bank's new CEO John Cryan plans to ax about half his investment bank's clients, or in his language, "off-board" them.

"In global markets and global transaction banking we expect to off-board about half of the current list of clients as the economic returns in these relationships are inadequate to us," Cryan told analysts two weeks ago as part of his bank's revival plan.

He said 80 percent of the investment bank's income came from 30 percent of clients.   Continued...

The Canary Wharf financial district is seen in east London November 12, 2014.  REUTERS/Suzanne Plunkett