This IIM-A grad doesn’t have a LinkedIn profile but his team is bringing in billions in global funding
There, Chetankumar Shah, a low-key, publicity-shy banker in his early 50s, leads a team that oversees the complex financing of clients ranging from Asian tycoons to an Indonesian conglomerate, while negotiating the distressed debt of companies, including an Israeli shipping company.
Shah may not be a household name on Wall Street, but his global finance and credit trading group pulls in about 3 billion euros ($3.5 billion) a year, which is about a third revenue from the entire investment banking division, people familiar with said the matter. After working alongside former fixed income veterans like Sajid Javid – now a UK lawmaker – and Rajeev Misra of SoftBank Group Corp., Shah now heads a unit that is the main moneymaker for the investment bank. most quarters, the people said, declining to be identified because details are not public.
Its prominence underscores that even after years of trying to exit volatile businesses, Deutsche Bank has not been able to exit businesses that pose risks if the markets turn. CEO Christian Sewing is targeting revenue growth after a relentless cost-cutting campaign, a return to credit default swaps and possibly base metals trading. The company’s top regulator has previously voiced concerns about the risks it takes in leveraged loans – a familiar refrain for a bank whose recent stumbles have led to the highest legal bills of any European lender , leading to losses in five of the past six years.
Under Shah’s leadership, Deutsche Bank cemented its role as one of the world’s largest credit brokers. His global empire includes the distressed debt trading business that has long been a strength of Germany’s biggest bank, as well as a lending unit that served as a growth area after many Wall Street rivals withdrew following the financial crisis.
“He was one of the pioneers who helped us create the markets business almost from scratch,” said Anshu Jain, the former co-CEO of Deutsche Bank who worked with Shah for more than a decade. a decade and is now Chairman of Cantor Fitzgerald LP. “Chetan has decades of experience in very good risk management.”
Amid all the recent turmoil at the bank that has led to a string of executive departures, including Jain and former CEOs John Cryan and Juergen Fitschen, Shah has been a constant. He has outlived six CEOs in his more than 15 years on the credit team, working as head or co-head for the past six years.
Despite the billions his team brings in, Shah shuns the limelight from his nondescript corner office in the heart of Singapore’s financial district. He declined to comment or be photographed for this story. A vegetarian teetotaler who loves cricket, Shah doesn’t even have a LinkedIn profile. He remains an “enigma”, even to a banker who has worked alongside him for a decade.
Born in India, Shah studied at the prestigious Indian Institute of Management in Ahmedabad, one of three students awarded a medal for academic performance. He joined Deutsche Bank in 1994, initially trading Indian rates and treasury bills in Mumbai, eventually becoming head of global credit trading.
Shah moved to Singapore in 2005, joining many financiers drawn to the financial center for its proximity to other Asian markets. Lower taxes are also attracting many bankers, as Singapore’s top marginal tax rate of 22% is less than half that of Germany.
At the time, Asia was taking on a bigger role for the bank, which was expanding beyond its early roots after establishing an outpost in Singapore in the 1970s to help German companies such as Bayerische Motoren Werke AG and Siemens AG to expand in the region.
As head of global credit trading and financing, Shah reports to investment banking director Mark Fedorcik and Ram Nayak, who lead the foreign exchange and fixed income businesses. His team, spread across Hong Kong, New York and London, makes money by negotiating distressed debt and offering private credit in sectors ranging from real estate to renewable energy in Europe, Asia and the United States. United, according to people familiar with the business. It is also home to a hodgepodge of more complex loans from Deutsche Bank.
Globally, private credit soared to nearly $1 trillion following the financial crisis, as many commercial banks cut lending. Deutsche Bank is one of the biggest players in the space, joining Apollo Global Management Group Inc. Other investment banks — from UBS Group AG to Credit Suisse Group AG — offer similar credit, but none count. as much on this activity as Deutsche Bank. to generate profits. “Our credit business has been a consistent performer for the bank for many years,” a bank spokesperson said. “It offers a wide range of banking services to customers, including high quality secured loans. This activity benefits from the bank’s rigorous risk management processes, its diversified business portfolio and its long experience in the credit market.”
The team is doing deals in Asia and elsewhere that other firms might be too nervous to touch, fueled by confidence that they have a good understanding of the risks involved, bankers familiar with the strategy said. Shah’s team provides high-risk credit, sometimes backed by derivatives which have so far kept losses to a minimum. The covers provide credit protection for loans made by Deutsche Bank, often to cash-strapped but asset-rich Asian entrepreneurs, the people said. The team also provides short-term financing, known as mezzanine loans, earning interest of up to 15%, the sources said. “There is an opening in the market, and Deutsche Bank is filling it,” said School of Economics professor Tom Kirchmaier, referring to the division headed by Shah. “On the other hand, lending to people with Illiquid assets are always tricky business and it’s hostage to the state of the economy and country risk. You can’t hedge yourself that easily.”
The bank has been building the division over the past year – it recently hired credit traders in Singapore from Australia & New Zealand Banking Group Ltd. and has also hired a few dozen traders over the past year on either side of the Atlantic. While some have been replacements, a number are new positions.
Among the lender’s clients are the Indonesian group Lippo, controlled by the billionaire Riady family. In India, the bank brokered debt from shell lender Altico Capital India Ltd.
China is also a growing market for the group. The bank is part of a joint venture with Huarong Rongde Asset Management Co., a unit of the troubled firm that was bailed out by Chinese banks in August. Deutsche Bank’s credit exposure in the world’s second-largest economy has grown by around 50% in just four years to reach 11.8 billion euros in 2020, according to annual reports.
The increase in lending comes as the country is in the throes of a credit crunch regarding developer China Evergrande Group. The contagion spread to other real estate companies, pushing junk bond yields to a decade high. Deutsche Bank chief financial officer James von Moltke told a conference last month that any fallout from its China property exposure was “manageable”.
Troubled debt has been one of Deutsche Bank’s main sources of revenue over the years. In the aftermath of the credit crunch, he became a major creditor of collapsing Lehman Brothers Holdings Inc., earning more than $1 billion as positions recovered, a said a person familiar with the transactions. The company received a boost this week when a UK court ruled that Deutsche Bank and other holders of subordinated debt issued by a Lehman subsidiary must be paid before other claims are satisfied. The bank’s lending business also entered Ireland as the country began to recover from Western Europe’s biggest property crash, underscoring its appetite for risky deals.
More recent wins for Shah’s group include a long-running bet on Israeli shipping company Zim Integrated Shipping Services Ltd. which put the lender on track for one of its biggest gains since ‘Big Short’ trades against risky US securities more than a decade ago With the container carrier riding the rate wave record freight, Deutsche Bank’s potential windfall could climb to nearly $1 billion, Bloomberg News reported in June. trading at a steep discount and also bought shares. These investments surged and the bank recognized 300 million euros in income from the bet in the first half of this year.
Part of Deutsche Bank’s push into countries like India has been to lend to cash-strapped tycoons and buy up troubled assets. Prior to 2018, this activity was dominated by short-term funding from shadow banks and mutual funds, which have since declined. India’s shadow banking crisis and revitalized bankruptcy process are creating new opportunities for lenders, including Deutsche Bank.
Shah’s business shows no signs of slowing down. Fedorcik said recently that securities trading revenue accelerated in August and the first weeks of September after a slow start to the quarter. He confirmed that revenue for the division – which includes Shah’s unit – would be around 9.3 billion euros this year. The bank is due to publish its results on October 27.
For Shah and his global team, the question now is whether they can maintain the momentum.
As Angela Gallo, senior lecturer in finance at Bayes Business School in London, points out, the risks of these transactions are very similar to the structured products of the global financial crisis.
“The market is underestimating the joint likelihood of having both credit markets and collateral markets in trouble, especially when the latter are illiquid markets,” she said. “If you add complexity to the mix, opacity adds risk to any business transaction.”
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