Wednesday 21 February 2018

Deutsche's Irish funds operation admits filing error

John Cryan, chief executive of Deutsche Bank
John Cryan, chief executive of Deutsche Bank

Gretchen Friemann

Deutsche Bank's funds administration and corporate services arm in Ireland was forced to wear a €4.2m operational loss after incorrectly reporting client structures or entities, the local division's annual results reveal.

The admission of error comes at an awkward time for Deutsche. The German banking giant, headed by CEO John Cryan, has just agreed to sell its global corporate services unit - housed within its global transaction banking business - to Vistra Group, the European fund administrator controlled by Barings Private Equity Asia.

The deal was unveiled last week and is due to close in the first half of 2018.

Onno Bouwmeister, Vistra's managing director of alternative investments, singled out the access to the Irish market as a key attraction of the acquisition. He described the deal as a "significant step in Vistra's growth" and said "it gives us a presence in Ireland, a key strategic jurisdiction particularly in light of the upcoming 'Brexit' process".

In its accounts Deutsche International Corporate Services (Ireland) Ltd, which employs 66 staff, racked up a 27pc decrease in net profits for the past year on the back of "operational recharges and group overhead allocations".

The Irish subsidiary referred to the accounting error as the sole "significant event" in 2016 and said a "material operational provision has been taken as an operational loss"

The error was described as a "failure to make the appropriate filings on behalf of a small number of client structures" and the company said it "had agreed to make good the resulting financial impact on those structures".

A spokesperson for Deutsche declined to comment.

Vistra has pledged to offer all Deutsche employees the opportunity to work in the enlarged organisation. However the accounts for the Irish arm highlight the mounting competition in the corporate services sector, which is described as "challenging".

Revenue in this area of the business declined by 10pc in 2016. The company blamed a high level of run-offs from maturing special-purpose vehicles, largely entities holding securitised debts, including collaterised loan obligations and collaterised debt obligations.

But it also blamed a fall in new business.

The Irish unit's alternative fund services segment though continued to grow strongly as "market demand for private equity and real assets increased".

Irish Independent

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