Deutsche Bank rebuilds office in Mexico as others head for exit

Bloomberg

Deutsche Bank AG sees opportunity in Mexico where other investment banks don’t.
The German lender is expanding its operations in Latin America’s second-largest economy, with an eye to tapping into international interest in the country’s manufacturing base, according to Christiana Riley, chief executive officer of Deutsche Bank Americas. That means focusing on providing more foreign-exchange and fixed-income derivatives to corporate clients, she said.
The expansion stands in sharp contrast to banks including UBS Group AG and Credit Suisse Group AG that have sought to dial back operations in recent years in Mexico as they look to cut costs and exit non-core markets. Citigroup Inc is selling its retail unit, Banamex, while holding onto its corporate and investment banking business.
“The volume of inbound investment is driving the need for incremental foreign-exchange and risk-management solutions,” Riley said in an interview from the bank’s offices in Mexico City.
Regarding job cuts facing much of the industry, she said the bank was focused on seeing who they might be able to hire as other firms shed staff in Mexico and the US.
Mexico’s peso is trading near a five-year high and local stocks have had a strong start to the year, supported by signs that more and more companies are moving factories to Mexico to take advantage of its location close to the US in a trend called nearshoring.
The nation’s industrial parks are benefiting as international companies relocate supply chains, with demand from businesses in countries including China, Italy, Germany and South Korea.
After scaling down its presence in 2016, the Frankfurt-based bank started rebuilding its trading unit last year, with Marliz Mejia as chief executive officer for Deutsche Securities Mexico.
Mejia said local operations, with a staff of 30, were backed
by €120 million ($128 million) of capital investment. The office will begin serving local
institutional clients such as pension funds this year, she said.
Mejia warned that risks for the peso included the knock-on effects of a US recession or a move by Mexico’s central bank to decouple from the US Federal Reserve’s path of rate hikes.
Elections next year will also introduce volatility to the peso, she said.
Still, there are no signs yet of investors hedging for a big move in the peso due to the election, Mejia said. Nor has she seen the risky use of derivatives that led to big problems at Mexican companies like Cemex and Comercial Mexicana in the wake of the 2008 financial crisis. “The derivatives we’re working with, with our clients, are oriented to hedge those risks,” she said.
Riley said Deutsche Bank had wound down in Mexico the last decade as the company cut costs.