Deutsche Bank CEO Calls End to Trading Boom in Second Half
Sewing Says Deutsche Bank Trading Momentum Continued in June
(Bloomberg) -- Deutsche Bank AG’s booming trading desks are set to see the frenetic activity of the first six months ease as the exceptional market situation created by the coronavirus ebbs, according to Chief Executive Officer Christian Sewing.
The German lender will see a slowdown in the second half after benefiting from continued momentum in markets through June, Sewing said during a webcast hosted by Bloomberg News on Tuesday. While the bank is on track or ahead on its restructuring plan despite the pandemic, he said, debt capital markets is one area that’s set to decelerate in the coming months.
Sewing is one year into a radical overhaul that rolled back much of Deutsche Bank’s aggressive expansion as a global investment bank to focus on its traditional business of corporate banking, though recently he’s relied more heavily on revenue from fixed-income trading. The lender had a strong start first half in its securities business as debt security issuance boomed and clients sought hedges in volatile markets.
“The investment bank is clearly on track,” Sewing said, adding that was also in part due to its change of emphasis and not just market volatility in the first six months. In the second half, “there will be for sure a little bit of slowdown” because not all factors that helped in the recent period will be repeated.
Deutsche Bank to Bulk Up High-Grade Bond Trading Amid Volatility
Deutsche Bank had been losing market share in fixed-income trading for several years before the restructuring announcement. Investment banking heads Ram Nayak and Mark Fedorcik have vowed to stop the decline and ultimately win back some market share.
A stabilization in trading “is needed to stem the key revenue risk to Deutsche Bank’s strategy, in our view,” Bloomberg Intelligence analysts led by Alison Williams wrote in a recent note. They also warned that the economic “downturn concerns bear watching.”
Deutsche Bank fluctuated between gains and losses on Tuesday and was trading little changed at 8.81 euros as of 1:31 p.m. local time. The stock has gained about 28% this year, making it one of Europe’s best-performing bank shares.
The trading unit posted a 13% gain in revenue in the first quarter, although that was less than the average at U.S. competitors. Sewing on Tuesday also reiterated a cost target for this year and also a longer-term profitability goal.
Sewing also highlighted the banking division providing cash management and trade finance services to companies as the “heart of Deutsche Bank” and said the lender is looking at the banking unit of the collapsed payments company Wirecard AG to see if it contains technology that could strengthen the transaction bank. The hurdles for any deal would be high, he also said.
Deutsche Bank has been considering an acquisition of Wirecard Bank or at least parts of it, Bloomberg reported last week.
The bank is making headway with its plan to pass on negative interest rates and effectively charge clients if they keep deposits at the bank.
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