Deutsche Bank CEO Grapples With Slowing Trading After Boom Year

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Deutsche Bank AG’s blowout trading results gave Chief Executive Officer Christian Sewing some breathing room, but he now faces the prospect of declining revenue half way through his historic restructuring plan.

The investment bank -- focused on fixed-income trading -- will see a slowdown as the volatile conditions that drove last year’s boom begin to fade, the lender said in its annual report on Friday. Prolonged negative rates will offset higher volumes and fees in the corporate and private bank, the lender said. Overall, revenue will drop “marginally.”

Deutsche Bank CEO Grapples With Slowing Trading After Boom Year

Almost half-way into a deep restructuring of Deutsche Bank, Sewing is now contending with how to boost growth in other areas of the bank after the pandemic gave an unexpected boost to a securities unit that had languished for years. While booming trading helped the bank meet targets that many analysts had viewed as too ambitious, the lending businesses at the core of his turnaround are still struggling with prolonged low rates.

“We continue to expect investment bank revenues to decline year-on-year as industry volumes and volatility normalize from very high levels of activity in 2020,” Sewing said, while at the same time signaling thatthe bank had a strong start to the year.

Deutsche Bank shares gained 0.7% to 10.58 euros as of 10:55 a.m. in Frankfurt. The stock is up 18% this year.

The bank said previously it expects to be profitable again this year. It posted its first annual profit in six years in 2020, driven by the investment bank.

To retain top performers, the investment bank saw an increase in its bonus pool of 46%, compared with a rise in variable compensation of 29% for the bank as a whole to about 1.9 billion euros. Deutsche Bank initially planned to expand the entire pool by a third but had to scale back the plan after objections from the European Central Bank, Bloomberg News has reported.

The bonus increase “balanced Deutsche Bank’s significantly improved financial performance, delivery against published targets and retention of top talent with the goal of maintaining capital strength,” it said.

Analysts expect Deutsche Bank’s revenue to fall to 22.9 billion euros this year while they anticipate an increase in net income to about 800 million euros, according to the average forecast compiled by Bloomberg. Sewing has set a target of about 24.4 billion euros in 2022 revenue, compared with 24 billion euros last year.

”We acknowledge there are additional headwinds we are facing,” most importantly interest rates, Deutsche Bank said. “We expect that our refocused business model across the Core Bank can offset some of these challenges, as we focus on growing our market share with our top institutional, corporate and retail clients.”

©2021 Bloomberg L.P.

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