Deutsche Bank on the Joy of Depositary Receipts (part 2)
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Deutsche Bank (FWB:DBK)(NYSE: DB) has over 970 depositary receipt programs (with a market value of at least USD 100 billion) in 58 countries. Akbar Poonawala, Global Head in charge of the depositary receipts business (among many other roles), discusses depositary receipts (foreign stocks traded on local exchanges) and the role DRs play in global investing.
[continued from part 1]
Nick Slepko: Of the four depository banks, where does Deutsche Bank rank?
Akbar Poonawala: It’s not about numbers. For instance, I could sit here and tell you we have a 100% of all the ADRs to come out of China this year.
Slepko: Wow! How –
Poonawala: Of course there’s only two sponsored ADRs to come out of China this year [Duoyuan Global Water (OTC), Vipshop (NYSE)]. That’s an example of how numbers can be a little misleading and a little self-serving. We are proud to say that we have grown significantly faster than any other depositary bank in recent years. We can now offer over 970 DR programs globally from 58 countries. In addition, 55 companies have moved their programs to us from the competition since 2000. In 2012, these include BASF and Siemens (Germany), BG Group (UK), DSM (Netherlands) and CorpBanca (Chile).
Slepko: What is your claim to fame?
Poonawala: We've had a lot of firsts to our credit such as being the first to offer GDR programs from Croatia, Lithuania, Lebanon, Morocco, Sri Lanka, and Vietnam. The Vietnamese program, which was listed on the London Stock Exchange, was particularly notable as in addition to being the first GDR from the country it marked the first time a Vietnamese company listed its equity overseas. As a result, it won Deutsche Bank the title of best DR bank in Vietnam in The Asset’s 2012 TripleA Awards for the Hoang Anh Gia Lai DR.
Deutsche Bank was also the first to create and set up the first euro-denominated depositary receipt in 1998. We set up the first international equity-linked convertible bond from India, the first yen-denominated DR in Korea, the first Canadian-listed GDR in connection with an M&A transaction for a Brazilian company, as well as the first to list a Russian financial institution using a structure in Germany – which won Deutsche Bank the Best DR Bank Program Award of 2012 from EMEA Finance for the NOMOS Bank DR.
Slepko: What motivates them to switch over?
Poonawala: With all humility, Deutsche Bank is the go-to bank. It’s our systematic approach based around the company’s objectives and our passion for value addition.
We put ourselves in the shoes of the CFO and Investor Relations Officer, and ask, “How can we add value?” But we don’t assume the role of the company, we don’t act like we’re the most important cog in the wheel. The performance of the company is paramount. Our role is to help the company broadcast its message broadly and narrowly – broadly to a wider set of investors, and narrowly in a focused manner, whether they are institutional or individual investors, depending on the objectives of the issuer.
We also have a dedicated DR Market Solutions team that provides analytics and investor relations support to our clients. In partnership with the company and in line with their investor relations goals, our team acts as an additional resource in order to provide initiatives covering investor outreach, specialized peer group analysis, information on IR vendors and guidance on road shows.
Prospective clients also like our focus on innovation. For example, last month, Deutsche Bank was the first depositary bank to offer ADR clients a virtual investor conference by leveraging the latest online technology in a unique virtual environment. Nine global companies such as Nordea, SAP, Localiza, Marks & Spencer, presented from the comfort of their desks without having to travel to an audience of over 600. We’ll be doing this on an on-going basis now and it has proven to be very popular.
Slepko: How significant is the DR business for DB?
Poonawala: DRs are a significant component of one of Deutsche Bank’s four pillars, Global Transaction Banking. Deutsche Bank started in the DR business over twenty years ago, and while we were the last to enter, in market share we now rank second.
Slepko: How does DB profit from DRs?
Poonawala: The DR business generates fee-based revenues from cross-border activity and from dividends in line with industry standards.
Slepko: Have there been any major disasters with a DR program you’ve had to overcome?
Poonawala: I’ve been associated with the DR business for a good number of years, and, fortunately during that time, in the DR business we’ve not had anything that would qualify as a disaster because of our preventative controls and risk measures. In addition to the wider bank’s legal and compliance teams, we have a dedicated transaction structuring and management group in the DR team, and we also use external counsel as an additional check, a combination that is unique in the industry.
A good example of a disaster being averted was for one of my clients. A Russian issuer had put its program out to bid, and we were very interested, but another depositary bank won by reducing their pricing, possibly to gain entry into the Russian DR market. Unfortunately for them, they did not have the level or depth of expertise that we did in closing Russian DRs in an expedited manner. The DR needed to be closed over the Christmas holiday break, and shortly before Christmas Eve, the company called us up, said they’d made a mistake, cancelled the mandate for the other bank, and transferred the project over to us (at our original pricing), and our unique structuring and management team allowed us to get it done for the client.
[continued in part 3]
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