A year ago, fixed income trading had a record quarter, rising more than 30 percent.
(Photo: Blatterspiel/Jan Huebner)
Frankfurt The downturn in investment banking weighs on Deutsche Bank. In trading with fixed-income securities, earnings in the current quarter are 15 to 20 percent below the previous year’s figure, CFO James von Moltke said on Thursday at an analysts’ conference in Paris.
The slump is thus stronger than previously expected by experts. Deutsche Bank shares then fell more than two percent on Thursday. After the extraordinarily strong period of the previous year, it is “normal that we now have a decline,” said von Moltke.
The major US investment banks Goldman Sachs and Morgan Stanley had previously warned of declines in investment banking. The reason for this is the “extraordinarily challenging” macroeconomic situation, Goldman Sachs President John Waldron said earlier this month.
Goldman expects trading revenue to fall more than 25 percent in the second quarter. There is also a downturn in the management of mergers, acquisitions and securities placements. Morgan Stanley anticipates a drop in revenue of around 15 percent in each of the two divisions.
At Deutsche Bank, mergers and acquisitions (M&A) business is developing similarly to the second quarter of 2022 or slightly better, said von Moltke. He sees the first signs of more activity on the market.
From January to the end of March, Deutsche Bank’s investment banking revenues fell 19 percent. In the important business with bonds, foreign exchange and derivatives, the decline amounted to 17 percent.
Point of contact for frustrated Credit Suisse clients
The entire industry is threatened with the second slack year in a row. In 2022, the income of the twelve largest investment banks fell by an average of 13 percent, according to data from the financial information service Coalition. And there is currently no improvement in sight.
There are plenty of reasons for investors to worry, analysts said. Europe is already in a mild recession, and in the US there is a growing risk of a credit crunch and an economic crisis. Added to this would be inflation, the consequences of the US regional bank crisis, the prospect of falling corporate profits, growing geopolitical risks and the upcoming presidential election in the US.
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Goldman Sachs is therefore taking action and, according to media reports, wants to cut almost 250 jobs in the coming weeks. “We are now taking additional targeted actions on our workforce,” said Waldron.
Deutsche Bank wants to use the downturn, at least in the M&A business, to lure talent away from the competition. The money house hired around 25 high-ranking specialists to advise on takeovers and mergers, said Fabrizio Campelli, the board member responsible for the corporate and investment bank, at the beginning of May.
From the emergency merger of the major Swiss bank Credit Suisse with the domestic competitor UBS, Deutsche Bank not only benefits from the recruitment of new staff, said von Moltke. “We are a natural starting point for customers who want to diversify their banking relationships.” This not only applies to wealth management and investment banking, but also to traditional corporate customer business.
With agency material
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