(Bloomberg) — Deutsche Bank AG, which runs Europes biggest investment bank, said it expects the industrys revenue to decline this year as clients consider pulling back from trading some fixed-income securities and refrain from doing deals.
Securities firms will see debt trading revenue fall slightly from a year earlier as an increase in macro revenues due to monetary policy divergence will be more than offset by lower credit revenues, Deutsche Bank said in a statement from Frankfurt on Friday. Income from equity trading will probably be moderately lower in 2016, while corporate finance industry fee pools will fall due to a decline in deals to advise on, it said.
The beginning of 2016 has seen volatility in the worlds financial markets, co-Chief Executive Officers John Cryan and Juergen Fitschen said in a note to shareholders. This has impacted the banking sector. The seasonally strong first quarter might turn out to be challenging for the sector overall. Deutsche Bank is no exception to this.
JPMorgan, Citigroup
Germanys largest lender is first among big firms to offer a full-year forecast amid a global market rout. JPMorgan Chase & Co.s investment bank said in February that revenue from sales and trading had tumbled about 20 percent so far this year, while Citigroup Inc. said this month that first-quarter revenue from fixed-income and equity trading may drop 15 percent.
Deutsche Bank, which saw a management upheaval in 2015, is seeking to boost capital and profitability to reverse a slump that has made it the worst-valued major global lender. Rising provisions for past misconduct spanning its global businesses have hurt the banks financial strength, sapping more than the 11.5 billion euros ($13 billion) in equity it raised from investors in 2014 and 2013.
The shares have dropped about 19 percent this year. That compares with a 29 percent decline at Credit Suisse Group AG, which last year announced plans to shrink the securities business to focus on wealth management. Barclays Plc, which said last month that its investment bank swung into a fourth-quarter loss, has decreased 23 percent in 2016.
While Deutsche Bank is seeking to award staff compensation that allows it to compete for talent with other banks, the company will be underpaying against our international peer group for last year, Cryan said in January. The co-CEO said last week that he expects to resolve the largest of the lenders legal cases by the second or third quarter of this year.
Deutsche Bank scrapped 2015 bonuses for its management board, with Cryan saying in January that it would be inappropriate vis-a-vis society not to scale back variable compensation. The co-CEO said previously that bankers still earn too much money and are often promised rewards too quickly.
The company will pay 2.41 billion euros of bonuses for last year, down from 2.71 billion euros. Variable compensation at the investment banking and trading unit fell 15 percent to 1.45 billion euros. Deutsche Bank didnt cut bonuses as much as previously considered, with familiar people saying in October that it may trim variable compensation at the securities unit by almost a third.
Total compensation increased 5.1 percent to 10.5 billion euros as headcount rose 3 percent to 101,104 people, the bank said. Cryan received compensation of 1.9 million euros, while Fitschen was awarded 3.8 million euros.
If they could get away with 33 percent they would, said Jason Kennedy,head of recruitment firm Kennedy Group in London. They feel that 15 percent will be less visible publicly, so they preferred it. They can continue cutting throughout the year, and by year-end you will find Deutsche Bank have reached their original goal.