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FRANKFURT / Bloomberg
Deutsche Bank AG, which runs Europe’s biggest investment bank, said it expects the industry’s revenue to decline this year as clients consider pulling back from trading some fixed-income securities and refrain from doing deals.
Securities firms will see debt trading revenue fall “slightly†from a year earlier as “an increase in macro revenues due to monetary policy divergence will be more than offset by lower credit revenues,†Deutsche Bank said in a statement from Frankfurt. Income from equity trading will probably be “moderately lower†in 2016, while corporate finance industry fee pools will fall due to a decline in deals to advise on, it said.
“The beginning of 2016 has seen volatility in the world’s financial markets,†co-Chief Executive Officers John Cryan and Juergen Fitschen said in a note to shareholders. “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.â€
The shares rose 5.6 percent to 18.02 euros in Frankfurt this week after declining over the past few days. They have dropped about 40 percent over the past year.
JPMorgan, Citigroup
Germany’s largest lender is first among big securities firms to offer a full-year forecast after a global market rout, emerging-markets slowdown and plunging energy prices curbed trading revenue in the fourth quarter. JPMorgan Chase & Co.’s investment bank said in February that revenue from sales and trading had tumbled about 20 percent so far this year, while Citigroup Inc. said this month that first-quarter revenue from fixed-income and equity trading may drop 15 percent.
Debt trading accounted for 22 percent of Deutsche Bank’s 33.5 billion euros ($37 billion) of revenue last year. The nine biggest investment banks saw their combined earnings from the business fall 11 percent to $61.8 billion in 2015, the third
annual decline, data compiled by Bloomberg show.
‘Downward Pressure’
The asset and wealth management units, which were split this year, may see “downward revenue pressure†unless markets pick up, Deutsche Bank said.
The technology and operations of both divisions will be improved this year and “further initiatives will be launched to streamline our geographic and operational footprint,†it said.
Deutsche Bank, which saw a management upheaval in 2015, is seeking to boost capital and its profitability to reverse a slump that has made it the worst-valued major global lender. The rising provisions for the past misconduct spanning its global businesses have badly hurt the bank’s financial strength, sapping more than the 11.5 billion euros in equity
it raised from investors in 2014
and 2013.
The company’s comments on 2016 are more downbeat than those of smaller German competitor Commerzbank AG, which said on Friday that it expects a “slight improvement†in full-year net profit as it cuts costs and unwinds toxic assets.
Deutsche Bank has dropped about 20 percent this year. That compares with a 29 percent decline at Credit Suisse Group AG, which last year announced plans to shrink the securities business to focus on wealth management. Barclays Plc, which said last month that its investment bank swung into a fourth-quarter loss, has decreased 25 percent in 2016.