Deutsche Bank’s fixed income traders fuel investment bank gain

Deutsche Bank’s fixed income traders helped push its investment bank to an 11% gain during the second quarter, even as the bank posted sharp declines in dealmaking fees.

The German lender posted €2.6bn in revenue within its investment bank in the three months to the end of June, which was ahead of analyst expectations and up by 11%. The €2.4bn in fixed income trading revenue was up by 32% for the period and ahead of market predictions.

The bank said that revenue within its rates, foreign exchange and emerging markets trading units more than doubled on the prior year, offsetting declines in credit trading.

However, Deutsche Bank made just €21m within its key debt origination business, a decline of 95%, which it said was due to mark downs of €150m within its leveraged finance unit. Its fees from M&A swelled by 50% to €166m, but this was still below market expectations for these fees.

READDeutsche Bank’s fixed income trading unit bolsters profit

After the boom in dealmaking during 2021, when banks hauled in a record $130bn, according to data provider Dealogic, activity has slowed as market volatility has frozen equity deals and macro issues such as rising inflation have hit appetite for M&A.

Banks including Goldman Sachs and Morgan Stanley have scaled back pay within their investment banks to reflect the more muted market conditions. However, Deutsche Bank has spent €1.2bn on compensation in the first six months of 2022, which is an increase of 13% on the prior year.

Chief financial officer James von Moltke told journalists that the bank had put aside more compensation in the first six months to reflect performance. He added that it was a “lever” to manage costs and compensation decisions could change by the end of the year.

Von Moltke said that the bank was still hiring and was not going to “choke off investments” into the business after a period of expansion.

“With the best half-year profits since 2011, we have proven — once again — that we can deliver growth and rising profits in a challenging environment,” chief executive, Christian Sewing, said in a statement.

Overall, Deutsche Bank posted a profit of €1.2bn, which was an increase of 46% on the same period in 2021. This was ahead of analyst predictions of €950m.

To contact the author of this story with feedback or news, email Paul Clarke

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