Deutsche Bank AG’s investment banking business resumed in August and early September after a sluggish start to the third quarter, and a continued focus on costs should ensure more sustainable revenues going forward, according to division head .
Speaking at the Barclays Global Financial Services Conference September 14 Mark Fedorcik said July had started “quite muted for the markets in general”, but that activity resumed afterwards. Deutsche’s investment bank recorded “robust activity” in its financing, origination and advisory activities.
It aims for a current turnover of 2 to 2.5 billion euros per quarter, an expectation that Fedorcik has reaffirmed despite a certain potential seasonality.
Over the past two quarters, the investment bank has shown strong performance. The division’s net sales reached 3.10 billion euros in the quarter ended March 31, up more than 30% year-on-year. Then, in July, Deutsche released its best second quarter and first half results – for the whole group, not just for i-bank – since 2015, with the investment bank posting net income of 2.39 billion euros.
For the whole of 2021, Fedorcik said, the investment bank’s income would be in line with that of the previous year. This figure reached 9.29 billion euros in 2020, compared to around 7 billion euros in 2019.
When asked about revenue sustainability, Fedorcik noted a “fantastic” fixed income franchise and continued focus on costs.
In the third quarter of 2019, when the bank announced its in-depth strategic overhaul, non-interest charges amounted to € 1.57 billion. These fell by 15% for 1.35 billion euros in the second quarter of 2021.
For the group as a whole, the cost / income ratio target is 70%. For the investment bank, it is 56% for 2022, and Fedorcik has said it is on track to meet that target. Cost reduction efforts include front office staff reductions and the decommissioning of certain applications and workflow tools. The reengineering of interest rate and foreign exchange activities should also reduce costs.
The executive said he was building a “boring, repeatable quarterly business with sustainable earnings.”
Deutsche Bank is now able to “make the same game work quarter after quarter”, Fedorcik noted.