Deutsche Bank reported a 12% fall in revenues to €1.93bn for its core fixed income and currencies trading unit during the third quarter, saying the same period a year ago had been exceptional as clients repositioned after the invasion of Ukraine by Russia.
That was a better performance than European peer Barclays, which on Tuesday reported a 26% slump in fixed income trading revenues to £1.15bn. However, most US banks did better, reporting an average 1% rise in revenues here. All reported higher revenues than Deutsche too.
Bank of America saw a 6% increase to US$2.7bn, JP Morgan’s FICC revenues were up 1% to US$4.5bn and Citigroup’s leapt 14% to US$3.6bn. However, Goldman Sachs said its revenues here fell 6% to US$3.4bn and Morgan Stanley's were down 11% to US$1.95bn.
A year ago, Credit Suisse was still a reasonably large player in fixed income, but Deutsche’s chief financial officer James von Moltke said it was unclear who had picked up market share from the Swiss bank following its rescue takeover by UBS in March this year.
“I think it will take time to work out. We have taken on new colleagues and it will take time to pay off. We see some market share gains. In particular, we are stepping up our position in Swiss franc debt capital markets and see opportunities for growth,” he told reporters.
Within FIC, Deutsche said credit trading had proved particularly strong, “driven by improvements in flow business and strong performance in distressed”. That compensated for a slowdown in rates, FX, emerging markets and financing.
On the advisory and underwriting side, Deutsche’s figures bounced back from last year’s problems connected with leveraged financings which had initially failed to be syndicated, sparking one-off writedowns.
Revenues tripled to €323m but were up 56% if last year’s leveraged lending markdowns were ignored. Both debt capital markets and advisory saw declines. However, these were not as weak as Barclays, which saw a 32% fall in DCM. The US banks reported an average 12% increase in DCM.
Barclays was also an underperformer in advisory, seeing its revenues down 47%. At Deutsche advisory revenues were only down 22% to €71m year-on-year. However, this was still a disappointment as this is an area where Deutsche is investing to diversify away from FIC.
“Advisory revenues were significantly lower reflecting a decline in the industry fee pool,” said von Moltke. “However, with signs that deal activity is starting to recover, we expect our investments in Origination & Advisory to result in a significant improvement in performance into 2024.”
Across the US banks, advisory revenues were down 16%, with Morgan Stanley the worst affected, seeing its revenues here fall 35% to US$449m. Bank of America was the only major US bank to see an increase, with revenues up 4% to US$448m.
Following the end of September, Deutsche has completed the purchase of UK broker Numis, which will help its efforts to grow in origination and advisory.
Across the whole investment bank, revenues fell 4% to €2.27bn during the third quarter. Overall, the results were well received as pre-tax profits across the group rose 7% to €1.7bn despite indications that the benefits from higher interest rates may have peaked.
Provisions for credit losses were €245m, or 20bp of average loans. Deutsche has done a stress test of its commercial real estate loans and is keeping an eye on its exposure to US offices. The model suggested it could incur €900m of losses here.
“The likelihood and magnitude of occurrence will depend on the developments of the CRE markets, particularly in the US, and depend on the exposure specific fundamentals which allow a borrower to refinance,” it said.
In terms of revenues, chief executive Christian Sewing said the bank was “on course to exceed expectations again this year. We expect to be able to achieve a level of around €29bn of revenues”. He said this implied a higher growth rate than the 3.5%–4.5% target set for 2021–2025.