Jain Dismisses Concern Deutsche Lost Debt-Trading GroundNicholas Comfort
Deutsche Bank AG co-Chief Executive Officer Anshu Jain dismissed concern that his company is losing market share in debt trading, a mainstay of investment banking revenue, as it reduces assets to meet capital goals.
“Our market share indices are all in line, our peer performance versus average is still pretty good,” Jain said on a conference call with analysts today. “A very strong U.S. fixed income performance might at the margin, and a slightly dampened European performance, might have had an impact” on the second quarter, he said.
Deutsche Bank, which ranks third globally for revenue from trading in debt, currencies and commodities, saw income drop 11 percent in the second quarter from a year earlier, while its biggest U.S. competitors made gains. The Frankfurt-based lender, seeking to remain one of the top three investment banks, is reducing assets to bolster capital levels and fired staff to cut costs.
Jain was responding to a question from Stuart Graham, the London-based founder of Autonomous Research LLP.
“I know you’ve said you’re relatively relaxed about it, but this is the third quarter in a row that you’ve missed consensus,” Graham said on the conference call. “I wonder whether there’s something going on in terms of you’re having to shift the business down as you shed assets etcetera and we’re settling into a lower fixed income, currencies and commodities revenue trajectory.”
Deutsche Bank’s revenue from trading debt and other products fell to 1.9 billion euros ($2.52 billion) in the second quarter from 2.13 billion euros a year earlier, the bank said in a statement on its website today. That missed the 2.12 billion-euro average estimate of eight analysts surveyed by Bloomberg News.
JPMorgan Chase & Co., Goldman Sachs Group Inc., Citigroup Inc., Bank of America Corp. and Morgan Stanley, had a cumulative 12 percent increase from debt trading, according to data compiled by Bloomberg Industries.
Deutsche Bank doesn’t track analysts’ expectations as closely as it does market share when judging performance, said Jain, 50, a former debt salesman who led the investment bank unit before becoming co-CEO in June last year.
Deutsche Bank employed 8,543 front office staff at its investment-banking unit at the end of June, down 12 percent from the same period a year earlier, according to documents the company published on its website today. The bank said it reduced its balance sheet 6 percent to 1.9 trillion euros at the end of June from six months earlier to help raise capital adequacy levels.
“I would not put this down to any loss of competitive capacity,” Jain said. “The headcount cuts that we’ve done, the balance sheet reduction -- the usual suspects -- we’re very sensitive to making sure that those are done in ways that don’t impair our performance and I’m confident the new team is on track.”
Revenue from Deutsche Bank’s investment bank rose 9 percent to 3.71 billion euros in the second quarter as gains from trading equities and underwriting stocks and bonds outweighed the debt trading income decline, according to the company.