Deutsche Bank comes last in JPMorgan’s ranking of investment banks in EU, US

Bloomberg

Deutsche Bank AG came last in a ranking of European and US investment banks compiled by JPMorgan Chase & Co. because of ongoing concerns about trading revenue.
Analysts led by Kian Abouhossein cut their forecasts for Deutsche Bank “mainly on lower trading revenue” as European lenders are set to report a weaker first quarter than their US counterparts, the analysts wrote in a note. “We prefer investment banks with ability to show cost flexibility in a challenging environment,” they wrote.
January was a terrible month for trading, though February was better, people familiar have said. Deutsche Bank said in its annual report in March that conditions in the business continued to be challenging; UBS Group AG CEO Sergio Ermotti last month described the first quarter as one of the toughest in years and France’s Societe Generale SA announced job cuts after the slump.
“While management delivers on variables it can control, i.e. costs, capital and balance sheet/liquidity, the revenue environment remains challenging,” the analysts wrote. “The big question is on CIB revenues, where it is not clear the franchise is turning around yet.”
JPMorgan cut Deutsche Bank’s adjusted earnings per share estimate by 7 percent for the quarter, the most among the eight lenders. The average reduction was 3 percent and UBS Group AG was the only one left unchanged. Goldman Sachs Group Inc. topped the group, with UBS second.
Deutsche Bank’s revenue from trading securities has contracted for seven consecutive quarters and the unit is a focus in the lender’s talks with rival Commerzbank AG about a potential merger. One of the reasons Deutsche Bank is looking for a deal is to move the lender away from its large exposure to the volatile trading business, people familiar with the matter have said.
The current consensus estimate for the first quarter compiled by the bank expects a drop in trading revenue by 18.6 percent. The bank is scheduled to report first quarter results on April 26. The first quarter is traditionally the bank’s strongest one for trading revenue.
Second-quarter revenue will be “key to save yearly performance,” the JPMorgan analysts wrote in their note.