02.04.2012 - Frankfurt (Reuters) - Sal. Oppenheim once again on the road to success

– By Kathrin Jones and Philipp Halstrick

Following three years of crisis, the traditional bank Sal. Oppenheim is once again on the road to success. Since the near-insolvency in summer 2009 and ensuing bailout by Deutsche Bank, the company has focused on cost-cutting measures and reducing problem assets. This enabled the Cologne-based bank to return to profitability in 2011, as Chairman of the Executive Board Wilhelm von Haller told Reuters news agency in an interview published on Monday. The bank posted a profit figure in the double-digit millions.

For von Haller, appointed by Deutsche Bank to the newly acquired, crisis-hit subsidiary at the end of 2009, this is just the beginning. “We want to further raise profitability this year,” he emphasised. The aim is to attract new clients and to increase assets under management, which are currently at a stable €60 billion. In some segments the bank is hiring new employees now that the process of scaling down has been completed. Von Haller also expects a positive resolution to the legal disputes relating to suspected mistakes by the former bank management. “We have created reserves where they are necessary,” he said.

The bank, which has a history of more than 220 years, ran into difficulties because of its stake in the now insolvent Arcandor business group. Deutsche Bank stepped in and released funds totalling around €1 billion to acquire Sal. Oppenheim. This sector leader now hopes to make a decent profit. Deutsche Bank is currently undertaking a radical overhaul of its flagging asset management division and wants to divest large parts of its institutional business. This will mainly leave the business with small-scale savers and high-net worth private clients. The traditional Sal. Oppenheim brand aims primarily to attract millionaires; however it also serves institutional clients.

The reduction in credit and equity investment risks at Sal. Oppenheim – by around 70 percent since the end of 2009 – is to be continued in the years to come, emphasised von Haller, who will celebrate his 60th birthday in just a few days. In terms of cost-reduction measures, however, he considers the bank to be on the home straight already. “Since the end of 2009 we have worked hard on costs, bringing them down by 50 percent,” he said. Last year alone saw costs reduced by €200 million. Staffing has been reduced to just 900 from the original 2,400 – and this figure is to now be maintained. Not all those jobs were lost, however. For example, Sal. Oppenheim sold its investment banking business to the Australian institution Macquarie MQG.AX – more than 100 employees were transferred under the deal.

Regarding efficiency, Sal. Oppenheim still needs to ratchet up a notch, something all experts agree on. “Sal. Oppenheim is aiming for a cost-to-income ratio of around 75 percent in the medium term. We will not be able to achieve this yet in the current year.” The ratio measures operating expenses as a percentage of income. At present, Sal. Oppenheim is just below 100 percent. For purely private banks, a ratio of around 70 percent is considered healthy due to their cost-intensive advisory services. Large financial institutions generally have significantly lower ratios. Deutsche Bank itself recently had a ratio of just 78 percent.

NEW CLIENTS ACQUIRED

Von Haller himself worked for Deutsche Bank for several years, though not in asset management but in the corporate client business. Having good personal relationships to the clients is essential in both areas. According to von Haller, the damage to Sal. Oppenheim’s reputation was not nearly as severe as claimed by some competitors. “The new clients we attracted numbered in the triple digits in both 2010 and in 2011,” he pointed out. Regular personal contact with clients and intensive consultation are important, he said, and something that clients are willing to pay for. “We are also seeing a trend to more service-based fees. This applies to both institutional clients and major private clients.”

In this regard, von Haller expressed more positive sentiments than, for example, Swiss UBS, a leader in the asset management sector. The bank recently complained that margins remain under pressure because clients are investing too passively as a result of the debt crisis. Von Haller, by contrast, considers the worst of the euro debt crisis to be over with the bailout of Greece. In his view, investor uncertainty has decreased and markets are likely to gradually calm down. Politicians have learned to find the right solution and the media too are now reacting more serenely. “If you pass through a haunted house for the second or third time, you know exactly where the ghost is standing.”