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By Saikat Chatterjee and Denny Thomas
HONG KONG, June 11 (Reuters) - The exit of Deutsche Bank co-chief executive Anshu Jain may see the lendersurrender its strong position in Asia's fast growing foreignexchange and fixed income markets, with incoming CEO John Cryanexpected to cut some of the capital-intensive businesses Jainoversaw.
Deutsche was the joint No. 1 dealer by market share inAsia's foreign exchange markets in 2014, excluding Japan, andthird for fixed income, according to Greenwich Associates.
But while its trading businesses accounted for 66 percent ofDeutsche's Asia-Pacific revenue of 3.9 billion euros ($4.3billion) in 2014, they also tie-up an increasing amount ofcapital due to tougher regulatory requirements and relativelyilliquid markets.
"This might reduce the market participation of Deutsche Bankin fixed income and FX trading and create more room for otherbanks to grow in Asia," said Anshuman Jaiswal, senior analyst atconsultancy Celent.
Any scaling back would present an opportunity for otherlarge global banks such as JPMorgan, Citigroup andEurope's largest lender HSBC, which said on Tuesdaythat it was focusing on Asia for future growth.
"This might signal the end of the dominance of the bank inthe Asian FX and fixed income space," said the head of tradingat another European bank in Hong Kong, who declined to be namedas he was not authorised to speak to the media.
"While not immediately, they will certainly yield marketshare in the coming months".
Deutsche told Reuters in a statement that it remainscommitted to "defending its long dominant market position inAsia Pacific FX and fixed income markets, with a franchise thatis currently performing at record levels".
JAIN'S DESIGN
Jain was the architect of Deutsche's investment bankingbusiness and placed one of his former trading heads, AlanCloete, in Hong Kong as co-CEO for Asia Pacific in 2012.
While business across other regions has shrunk over the lastthree years, Asia registered growth of slightly over 4 percent,according to filings.
Still, the region punches below its weight, accounting for12.2 percent of global revenue in 2014, despite housing about afifth of its workforce.
On May 20, Deutsche said Cloete would leave the bank in the"near future", less than a month before Jain announced hisresignation.
Analysts say it is inevitable that Cryan will cut back inareas that are a big drain on capital like trading.
On a price-to-book valuation-- a commonly used metric tovalue banks -- Deutsche is at the bottom of the heap of Europeanbanks with a ratio of 0.5 times compared to Credit Suisse at 0.8 times, and UBS at 1.4.
Scaling back from Asia's foreign exchange and fixed incomemarkets would bring quick savings, but also carry the risk ofrelinquishing a strong position in a promising growth region.
The overall size of Asia's debt market is more than $34trillion, according to the Asian Development Bank, while China'syuan is now among the world's top ten traded currencies. (Reporting by Saikat Chatterjee and Denny Thomas; Editing byRachel Armstong)
