How Europe's Three Biggest Investment-Bank Overhauls Stack Up

  • Each lender's stock is down more than 40% since August
  • New CEOs have laid out different areas for growth, cutbacks

Over decades, Deutsche Bank AG, Barclays Plc and Credit Suisse Group AG all built and bought trading and investment-banking operations that stretched the globe and made billions of dollars in profit.

Recently, their parallels have been more regrettable: stock drops of more than 40 percent since August as shareholders were unswayed by strategy proposals from new chief executive officers amid a worsening market environment. While each aims for a smaller and simpler firm, the strategies do differ in their scope and what they will leave each lender looking like.

“It’s a very brave bank that walks away from its history,” said Chris Wheeler, a London-based analyst at Atlantic Equities. Credit Suisse and Barclays could retreat to their high margin operations in wealth management and consumer banking, “with much reduced investment banking operations. For Deutsche Bank, that option is not really on the table and as a result, the bid to boost profitability is crucial.”

New Mix

Deutsche Bank, led by Co-CEO John Cryan, has the biggest investment bank, and it’s set to remain the dominant division as the Frankfurt-based firm looks to sell consumer lender Deutsche Postbank AG. Barclays CEO Jes Staley’s decision to sell down the firm’s stake in its Africa business after a century in the continent leaves his bank with three main businesses, with the credit-card unit owning the highest profitability.

Credit Suisse CEO Tidjane Thiam, who replaced Brady Dougan last year, has staked much of his strategy on growth in wealth management, led by Asia. All three firms have moved unwanted assets into a non-core unit to wind down or sell.

Scale of Cuts

While Deutsche Bank will continue to cut risk-weighted assets from its investment bank through 2020, Credit Suisse did most of its planned reductions in the last three months of 2015. Barclays said it was satisfied with the size of its securities unit after shrinking it in half over the previous two years, with Staley describing investor calls to exit the business as “shortsighted.”

The investment bank units have also faced job cuts as the banks scale back unprofitable businesses. Credit Suisse said last month it was chopping 4,000 of its 48,000 employees across the whole firm, while Deutsche Bank is eliminating about 9 percent of its 101,000 employees. Barclays, which has reduced the company’s headcount by more than 10,000 in the last two years to 129,400, said in January it would cut 1,200 jobs in the investment bank.

What’s In, What’s Out

New capital rules are pushing all three of the banks in similar directions in some products. All have cut back on uncollateralized, long-dated derivatives and some interest-rate businesses that no longer produce sufficient returns. But each of the banks is also pulling back or remains strong in specific areas, often based on its history or scale.

Among their highly-ranked businesses, according to data compiled by Bloomberg and research firms Greenwich Associates and Coalition Development Ltd.:

Deutsche Bank:Barclays:Credit Suisse:
  • Foreign-exchange trading
  • European fixed-income trading
  • Equities trading
  • European bond trading
  • Energy investment banking
  • Leveraged finance
  • Credit trading
  • Africa and Middle East banking
  • Latin American investment banking

While the banks are cutting back in or have exited businesses including:

Deutsche Bank:Barclays:Credit Suisse:
  • Agency mortgage-backed securities
  • Asia cash equities trading
  • Interest-rates trading, including primary dealer roles
  • Emerging market debt trading
  • Securitized products
  • Distressed debt and collateralized loan obligations
  • Uncleared credit default swaps
  • Precious metals
  • Currency trading

— With assistance by Nicholas Comfort, and Stephen Morris

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