Financial Sector The Bank Brain Drain

Germany’s banks are facing an exodus as talented workers increasingly cast their lot with agile fintech startups, and the traditional institutions’ recruitment of top-flight job candidates is suffering too.
More fun at fintechs, bankers say.

 

For Daniel Bartsch, it was a remarkable turning point in a career that, for bankers, had been following the customary path. A few months ago, he traded the glass towers of Swiss financial institution UBS for a modest office near Frankfurt’s main train station.

From that point on, it wasn’t the beat of the global capital markets that set the rhythm to his working day but rather the financial wishes of Germany’s small and medium-sized enterprises (SMEs) that make up the German economy’s backbone.

After seven years as an investment banker, Mr. Bartsch co-founded Creditshelf, a marketplace for investment in SMEs, along with Tim Thabe, whom he has known since his college days. The two financed the startup out of their own pockets. When an investor took interest a couple of months later, they managed a capital increase and quit their jobs at UBS.

The most interesting activities are migrating out of the banks, for example, to the fintech camp. Joachim Hasebrook, Banking expert, ZEB

Creditshelf, founded barely a year ago, is hidden away in a five-story building in a kind of office-sharing community. Of the eight rooms on the second floor, the startup has six rooms to itself. The seventh room is occupied by Civis Air, a Czech company providing air cargo services. The two companies share the minimally-furnished eighth room, which serves as a space for conferences.

“The people close to me at first didn’t understand the decision. After all, I had a good job,” said Mr. Bartsch, who is also a managing director for the online marketplace for SME loans.

His acquaintances’ concerns were understandable. At the moment, Mr. Bartsch is earning only a fraction of what he earned for years as an investment banker.

Even so, Mr. Bartsch and Mr. Thabe are not the only ones who turned their backs on the banking business and sought their fortunes in the world of fintechs – those young and agile startups that want to radically transform the banking business.

Those in the United States who have made similar leaps include prominent bankers such as John Mack, the former head of Morgan Stanley; Vikram Pandit, the former chief executive of Citigroup; and Anshu Jain, the one-time co-chairman of Deutsche Bank.

The German fintech scene has yet to come up with such high-profile people aside from Jörg Asmussen, a former member of the European Central Bank’s executive board. He is now a non-executive director of the fintech Funding Circle.

But a closer look at the world of German fintechs reveals a lot of former bankers are among the new kids on the block. They include Thomas Bloch, a German banker who founded Vaamo after stints at Deutsche Bank and U.S.-based banking giant JPMorgan, and Ramin Niroumand, the co-founder and managing partner of Finleap who had been lead innovation manager at the Bavarian state bank, DKB.

The list could go on and on. In other words, the fintechs are not only taking away the banks’ business but also many of their most creative minds.

What motivates an investment banker such as Creditshelf’s Mr. Bartsch to trade huge benefits and a posh address in Zurich for a leaner salary and a couple of rooms in the Frankfurt train station district?

The short answer might be: A banker’s life is getting boring, and that’s triggering an exodus.

“The most interesting activities are migrating out of the banks, for example, to the fintech camp,” said Joachim Hasebrook of business-management consulting firm ZEB.

The consultants examined how the personnel situation has changed at German banks, and the firm produced a study titled “Future Without Employees, Employees Without a Future.” One finding: Many of the most qualified bankers today no longer work for banks.

“Financial services aren’t losing their appeal, the banks are,” Mr. Hasebrook said.

One reason, according to the study, is financial institutions invest primarily in information technology, processing departments and projects aimed at dealing with the increasingly stricter regulatory environment, but invest significantly less in customer service.

“Those who are expected to perform a service have the benefit of neither investments nor support,” Mr. Hasebrook said.

Creditshelf’s Mr. Bartsch put it this way: “We don’t want to sit another 10 years in a golden ivory tower and watch how business is getting increasingly more difficult and the regulating increasingly more strict.”

Many working in the banking sector agree with Mr. Bartsch. Take, for example, a recent survey of Deutsche Bank employees. The mood in Germany’s largest financial institution has been pretty bad for a long time in light of the bank’s radical restructuring and thousands of job cuts.

But many other reasons also exist for the foul mood of many employees of German banks. Around a third of Deutsche Bank’s workers complained of significant hurdles preventing them from doing their work efficiently: complex procedures, slow decision-making, a lack of cooperation.

“This is obviously partly a reflection of increased regulatory requirements,” said Deutsche Bank co-CEO John Cryan and Karl von Rohr, the chief administrative officer, in a written message to employees.

Since the financial crisis started in 2008, the banking business has been in profound upheaval, including painful restructurings, downsizings and job cuts.

In order to better shield society from the costly consequences of a financial-system meltdown, governments have been continually creating new regulations for banks in the aftermath of the Great Recession. Since then, many major banks have been focused primarily on implementing these new rules and requirements and withdrawing from more risky fields of business.

That is frustrating many bankers, and not just at Deutsche Bank.

“There have been so many new regulatory provisions after the financial crisis, you could spend the whole day with internal procedures,” said Ivonne Arold, who worked for over two decades in the capital market business, first for Dresdner Bank and then at French bank Calyon. “What had at one time been the essence of investment banking – the speed, the development of new products, the conquering of new markets – are as good as gone.”

A few months ago, Ms. Arold went to work for Peermatch, a fintech specialized in brokering real estate loans.

While working at consulting firm PwC, Cornelia Schwertner advised banks for years about issues such as money laundering and financial sanctions. She says the “increasing frustration” she observed in the banking industry was reason enough for her not to even consider working in a bank. At the start of the year, she had the choice of becoming a department head in the field of compliance at a major bank or be in charge of regulatory issues at the fintech Figo. She went, of course, with Figo.

“It looks great on your resumé when you have worked for a major bank, but in the end I found it more exciting to work in a fintech,” she said.

The exodus from banks has reached such proportions that established financial institutions are being forced to worry seriously about worker recruitment.

Liane Buchholz, the managing director of the Association of German Public Banks (VÖB) who also lectures on banking at the Berlin School of Economics and Law, sees an “alarming trend.” The number of applicants per advertised training position and the number of potential employees with college degrees are dropping. As is the overall quality of applicants. Banks, she says, will “clearly notice” they have lost their appeal compared with other businesses. Not helping matters is the bad image banks have as a result of the financial crisis.

Ms. Buchholz says the “distinct creative potential” is an important reason fintechs are much more in favor at the moment than banks. She also sees among her students a burgeoning startup frenzy: “There is something like a gold-rush mentality. Many are thinking of founding a fintech themselves.”

Many in the industry say it’s not easy to be creative in a bank.

“The financial industry has changed enormously due to digitalization,” said Vaamo’s Mr. Bloch, adding that banks haven’t been able to adapt quickly to the changes. “Going into the fintech scene offered the possibility of helping to drive the innovations forward yourself.”

Mr. Bloch is well aware that founding such a business involves risks. “But I don’t want to later regret that I didn’t at least try it once.”

His former associates also think he can pull it off. Most of the first investor money Mr. Bloch and Vaamo co-founder Oliver Vins collected was from their network of connections in the financial sector.

For some, creativity counts more than job security.

Chris Bartz, who a year ago made the move from the Mittelbrandenburgische Sparkasse savings bank to the fintech incubator Finleap, traded a secure job with greater pay for what he sees as helping revolutionize the financial sector.

Jobs with banks, in fact, are no longer as secure as before. In many institutions, one cost-cutting program comes hot on the heels of the other.

Management consulting firm Bain is afraid that the classic financial institutions could cut another 125,000 to 640,000 jobs in Germany in the next 10 years. In comparison, banks employed 775,000 workers 15 years ago.

Michael Kemmer, the general manager of the Association of German Banks, recently predicted: “The next 10 years will be a rather joyless aria of cost-squeezing.”

No wonder that such prospects frighten off promising young talent.

“The signs in the banking business were no longer so positive, and you were able to see that many departments were marked by job reduction,” said Richard Heller, who worked for seven years at Commerzbank in corporate banking.

He then became acquainted with Creditshelf. A few weeks later, he went to work there.

“The opportunity of being able to help shape and develop something new from the start excited me,” Mr. Heller said.

And so he, too, became a part of the great exodus out of the banks, and so far he hasn’t regretted the career change.

 

Yasmin Osman is a financial editor with Handelsblatt's banking team in Frankfurt. Frank Drost is a Handelsblatt editor in Berlin, covering financial supervision and banks. Michael Maisch is the deputy chief of Handelsblatt's finance desk in Frankfurt. To contact the authors: [email protected], [email protected].com and [email protected]