More empty seats means less bond underwriting.

Photographer: Jasper Juinen/Bloomberg

Deutsche Bank Leads a Retreat From Markets

Mark Gilbert is a Bloomberg View columnist and writes editorials on economics, finance and politics. He was London bureau chief for Bloomberg News and is the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”
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For five consecutive years, the end of December has seen Deutsche Bank atop the annual league tables as the bank that handled the most European bond sales. Not this year.

With recently installed Co-Chief Executive Officer John Cryan pledging to shrink its investment banking activities, Deutsche Bank is set to slip to third place, behind HSBC and Barclays. Moreover, the trend in bond underwriting suggests a diminishing likelihood that Europe will start to look more like the U.S., where borrowers use the capital markets to meet their funding needs rather than bank loans.

QuickTake Bank Liquidity

Bloomberg has European bond-market underwriting data (including international sales by both companies and governments, but excluding regular domestic government borrowing) stretching back to 1999; not once has Deutsche Bank been outside the top 10 in any quarter since then. In the 12 quarters since 2013, it's been the most active bank four times, second three times, and never lower than fifth. In the three months about to end, however, the Frankfurt-based lender is in 11th place:

That slump has helped drive Deutsche Bank down into third place for the year:

Source: Bloomberg

Deutsche Bank has managed 551 bond issues this year, the fewest since 2011. The 82 billion euros ($90 billion) the bank has helped borrowers raise this year is the lowest since 2002. Moreover, that trend is reflected in the overall market. European bond sales have raised just 1.71 trillion euros this year, the lowest total since 2007's 1.6 trillion euros and a far cry from 2009's record 2.5 trillion euros.

Europe's investment banks have been much slower than their U.S. counterparts to clean house since the credit crisis. As they belatedly try to trim costs and improve profitability -- in November alone, European banks announced more than 30,000 job cuts, including 11,000 at Deutsche Bank, 15,000 at Standard Chartered and 5,600 at Credit Suisse -- there's a risk that the region will lose its banking mojo.

That matters. You may have little sympathy when the institutions many of us deem responsible for tipping the global economy into recession have to shrink their businesses. But European Union efforts to forge a capital markets union are important to building a more efficient market for companies and governments to raise money, which in turn should lead to greater investment, more hiring and a stronger economy.

If firms such as Deutsche Bank retreat from the capital markets, financing will become tougher to find. That's something for European regulators to bear in mind as they try to solve the too-big-to-fail problem by forcing investment banks to curtail their activities. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Mark Gilbert at magilbert@bloomberg.net

To contact the editor responsible for this story:
James Greiff at jgreiff@bloomberg.net