The boss and founder of the asset manager Algebris likes to speak plain language – and has no problem if he offends with it.
Frankfurt Davide Serra is not one of the biggest, but one of the most outspoken investors in the European banking sector. While most of his colleagues keep a low profile when it comes to controversial topics, the man from Genoa likes to speak plain language – and has no problem if he offends with it.
Serra played volleyball professionally in his youth in Italy. He later made a career as a banking analyst – first at the major Swiss bank UBS, then at Morgan Stanley. In 2006, the manager, who has both Italian and British citizenship, founded the asset manager Algebris in London. He now manages 16 billion euros.
“I have an Italian heart, but a British brain,” Serra told the Financial Times a few years ago, which ennobled him as one of the “most respected investors in the European banking sector”. Serra is critical of the development of European financial institutions – and expresses what many other Anglo-Saxon investors think.
“Politicians and regulators in the US have understood that banks have to be profitable,” Serra told Handelsblatt. In Europe, on the other hand, it is much more difficult for financial institutions to make high profits because of the requirements of the banking supervisory authorities.
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Serra therefore changed its investment focus 15 years ago. Instead of investing in European bank stocks, he mainly invests in bank bonds – and has done well so far. The 51-year-old says that bonds from financial institutions offer attractive interest rates and are becoming safer and safer because financial institutions have to build up larger capital buffers. Not a single bond has failed for him in the past 15 years.
Developments in Ukraine crucial for bank stocks
According to Algebris, it has significant investments in Deutsche Bank bonds. Serra is enthusiastic about their CEO. “I think Germany should build a statue of Christian Sewing,” he says. When Sewing started restructuring the institute in 2018, the financial institution was in very bad shape.
“Back then, very few people believed that Christian could transform the bank so successfully within four years.” The institute is still dependent on investment banking, but the nature of the business has changed. Today there is a stronger focus on the customer in retail.
One of Sewing’s best decisions was not to take over Commerzbank in 2019 because that would have significantly increased the complexity of the German banking business, says Serra. If Deutsche Bank wants to catch up with its competitors in Europe, it will have to further reduce its costs in Germany.
According to Serra, mergers or takeovers are no longer an issue for Germany’s largest financial institution. “Large mergers are not attractive because of the regulatory framework in Europe.”
Sewing cannot be blamed for the fact that Deutsche Bank shares have lost around 20 percent since the beginning of the year, says Serra. The main reason for this is the war in Ukraine. “Germany and many Deutsche Bank customers have relied on cheap Russian energy for many years. So now they are under pressure.”
Like other Anglo-Saxon investors, the Algebris boss sees bank shares as a reflection of the respective economy. “If the war continues to escalate, European bank stocks will continue to fall,” says Serra. “If there’s a peace deal, they’re likely to go up 50 percent within three months.”
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