Revived DKW has course to plot

YESTERDAY it was Lehman brothers hinting strongly that it hoped to grow its non-US revenues from 30% to 50% of the total in the next few years. Today it is the turn of Dresdner Kleinwort Wasserstein to demonstrate that life has returned with a vengeance to the European investment banking scene.

The DKW figures, masked in the detail of its parent Dresdner Bank which reported today, are an astonishing success story even in the up-and-down world of investment banking. The Germans were coy about the figures last year - not surprisingly, given that the bank made a loss of at least e300m (£203m).

This year, although just as coy on the detail, it seems to have made a profit of a similar and possibly greater sum. Putting the two together, the turnaround amounts to

e600m, even on the most conservative of assumptions. And this from the bank that 12 months ago everyone had all-but written off.

The markets have improved but that is not the real story. Good, old-fashioned - or, rather, good modern-minded management - has transformed the business. It started with German insurer Allianz, which now controls Dresdner, saying that DKW could have a couple of years of support without interference in which to try to sort itself out.

It continued with chief executive Andrew Pisker, a Brit who learned the game in US investment banks, backed up by a small core of similarly experienced souls being brutal about cutting costs, and stripping out as much as they could of the excesses of the Wasserstein years when costs spiralled.

Then it was a matter of deciding what the bank could do, and committing resources only to areas where it had a chance to make money and a realistic expectation that customers would see it as a serious player.

Last year that was fixed interest; more recently it has been equities, and increasingly it has become corporate advisory, although that remains tough sledding. DKW was engaged, for example, to advise Wal-Mart on the deal that never happened for Safeway - so no great fee there. It is also advising Eurotunnel on how it might get out of its financial mess.

There are always questions with a recovery over how long it will last, how much was luck and how much was judgment. Rivals will be quick to dismiss it as a flash in the pan but there must be at least an even chance that today's profits will propel the bank into a virtuous circle of further growth.

However sympathetic they might be to its people and problems, clients won't deal with an organisation they fear might not be around in 12 months. The fact that DKW is clearly on the mend should encourage more to come back, and those who are there to do more business. Both will broaden the base of the bank's recovery.

That success, assuming it comes, will ironically bring to the fore another issue - which is who should own the business long-term. Dresdner is an unbridgeable gulf away in culture, and Allianz is unlikely to see investment banking as the best long-term home for its capital.

So Pisker and his team will also be doing some dealmaking on their own account - searching for an owner, a partner or a capital structure that will allow the bank to prosper. We must hope the search is successful. Europe needs investment banks which, even if they do not compete globally, can at least offer a decent service to European clients in our own backyard.

Pensions ploy

WHATEVER good things might come from the simplification of pensions legislation, the trustees of pensions schemes are increasingly concerned over what will be the likely impact of the levies that are needed to fund the proposed pension guarantee scheme.

Under this Government proposal, pension funds will contribute a small sum per member on a pro rata basis. This will create a fund that can then be used to compensate members of schemes which have failed. The strong will support the weak.

The trouble is that the cost could run into millions of pounds for any reasonably-sized fund, which is why I was intrigued to hear of one company that is thinking of making its members pay directly from their wages, rather than have the cost fall on the pension fund.

The legality of this is still being investigated but the logic is interesting. The scheme effectively provides members with a degree of insurance against them not getting the pension they were promised.

Therefore, they should pay the premium - which the company reckons will amount to about £50 per head.