Outlook for Deutsche Bank’s Trading, Investment Banking Revenues



Trading and investment banking revenues are expected to fall significantly

John Cryan, CEO (chief executive officer) of Deutsche Bank, said in a statement last month that he expects overall revenues in investment banks to decline in 2016. He cited low client activity in fixed income securities and mergers and acquisitions activity as the major reasons for this decline. In 4Q15, Deutsche Bank’s fixed income revenues declined 16%, while equity trading revenues declined 28% to 520 million euros.

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Banks (XLF) would suffer from a sharp decline in fixed income trading revenues in 2016. Equity-trading revenues are expected to be moderately lower. Cryan also mentioned that declining credit revenues would offset the increase in macro revenues due to divergence in monetary policies. Further, the corporate finance division would suffer from lower fee-related income, as advisory deals would be significantly lower.

Revenues from deposits in the consumer banking division would suffer from low interest rates. Income from credit products are expected to grow. Transaction banking is expected to see “stable development,” while cash management would feel “downward pressure.” Meanwhile, asset and wealth management divisions are expected to be pressured unless Market conditions improve.

What Deutsche Bank is saying

Cryan and Jüergen Fitschen, co-CEOs, said in a note to shareholders, “The beginning of 2016 has seen volatility in the world’s financial markets. This has impacted the banking sector. The seasonally strong first quarter might turn out to be challenging for the sector overall. Deutsche Bank is no exception to this.”

Traditionally, the first quarter of the year is a strong period for the securities business. Investors tend to put their annual investment strategies in place seasonally. However, volatile markets have kept clients away from issuing debt or equity, launching IPOs (initial public offerings), or making acquisitions.

Banks such as Citigroup (C), J.P. Morgan (JPM), and Goldman Sachs (GS) have reported significantly lower trading and investment banking revenues during the first quarter.

In the next part, we’ll see if Deutsche Bank’s overhaul plan can get it back on track.


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