Sal. Oppenheim Requiem for a Banking Tradition

Deutsche Bank is poised to dismember the private banking house it rescued in 2009, effectively marking the end a long era in German finance.
End of an era: Deutsche Bank is poised to absorb the historic private bank dating back to 1789.

The curtain is about to go down on the 228-year history of what was once Germany’s preeminent private banking house as Deutsche Bank carves out the profitable asset management business of its Sal. Oppenheim unit to integrate into its own money management operation.

What’s left of the historic banking house that Deutsche rescued in 2009 can hardly stand on its own. The personal advisory services will likely be integrated into Deutsche Bank’s own wealth management division and Sal. Oppenheim will disappear as a separate entity, Handelsblatt has learned from industry sources. The parties involved declined comment.

The likely demise of Sal. Oppenheim is another nail in the coffin of Germany’s proud merchant banking tradition, which included the original Rothschild bank in Frankfurt as well as Bismarck’s Berlin banker, S. Bleichröder. There are still a few survivors hanging on – such as M.M. Warburg and Berenberg in Hamburg or B. Metzler in Frankfurt – but the loss of Oppenheim effectively marks the end of an era.

It’s a sad end for a banking house founded in 1789, the year the French Revolution broke out and George Washington took office as the first president of the United States.

The banking house itself was hardly blameless. The mismanagement that crippled the house in 2009 and resulted in a criminal conviction for Christopher von Oppenheim, a descendant of founder Salomon Oppenheim, was only the final straw in a checkered history as the traditional bank tried to adapt to the globalization of financial markets.

That effort was not totally without success. Even though it needed rescuing in 2009, Deutsche still paid €1 billion for the Cologne-based bank. The asset management operation it now wants to integrate into its own has a solid reputation for quantitative money management – relying on complex mathematical models to identify investment opportunities – that consistently outperforms the benchmark indices.

But it’s a far cry from the time when Oppenheim partner Harald Kühnen could serve a term as president of the powerful Association of German Banks in the early 1980s, or when the bank could attract former Bundesbank president Karl Otto Pöhl as partner in 1992. And it’s a sad end for a banking house founded in 1789, the year the French Revolution broke out and George Washington took office as the first president of the United States. For a period after it took over BHF-Bank in 2004, Sal. Oppenheim was the largest private banking house in Europe.

Deutsche AM, the asset management unit of Germany’s largest bank, has little quantitative management expertise of its own, so the addition of the Oppenheim operation, with its team of 40 to 50 managers, will give the bank a new calling card in attracting funds. This will help its effort to expand internationally, especially in Asia. Deutsche plans to float a minority stake in the unit on the stock exchange, perhaps as early as next spring.

The IPO for Deutsche AM is part of the bank’s overall restructuring, along with integration of its Postbank subsidiary into its own retail branch network and other efforts to cut costs. Amid weak earnings – the quarterly report due out this week will reportedly be disappointing – these concrete actions to improve profitability will be closely watched by impatient investors.

So the demise of what is now a relatively small private banking house might seem a small price to pay to help Germany’s financial flagship right itself. The mismanagement that led Sal. Oppenheim to overextend itself into investments like retail and travel group Arcandor, which collapsed in a spectacular bankruptcy in 2009, is more to blame than Deutsche Bank’s strategists.

But as Sal. Oppenheim disappears into the maw of anonymity in a bank founded when it was already four decades old, a vital part of German history is gasping its last breath.

Yasmin Osman and Michael Maisch cover banking for Handelsblatt. Darrell Delamaide contributed to and adapted this article for Handelsblatt Global. To contact the authors: [email protected], [email protected], [email protected].