Deutsche Bank plans big cuts in US equities

  • Business
  • Wednesday, 25 Apr 2018

Major player: Deutsche Bank headquarters in Frankfurt. The group ranks between seventh and ninth among investment banks in revenue from the cash equities business. — Bloomberg

FRANKFURT: Deutsche Bank AG is considering extensive cuts to its cash equities business in the US as part of a wider restructuring of its investment bank, according to people familiar with the matter.

A decision could come as early as this week and may be communicated as part of a larger package of changes to the German lender’s securities unit, said the people, asking not to be identified because the details are confidential.

No final decision has been made and the supervisory board will discuss the issue today ahead of the scheduled publication of the financial results for the first quarter tomorrow, according to the people.

A spokeswoman for Frankfurt-based Deutsche Bank declined to comment.

Cash equities, or the trading of regular stocks, has traditionally been a core business of investment banks, but regulation and technology have made it less profitable in recent years.

A retreat from that business in the US, where Deutsche Bank has struggled to compete with the large Wall Street firms, would mark a strategic shift under new chief executive officer Christian Sewing, who took over from John Cryan earlier this month.

In a first memo to staff, Sewing had taken a tough line on the bank’s stubbornly-high costs and said the bank would pull back from areas where it’s “not sufficiently profitable.”

The bank said in its annual report that cash equities revenue was little changed from 2016 as volume remained “challenged” last year, without providing figures.

Deutsche Bank ranked between seventh and ninth among investment banks in revenue from the cash equities business, according to data compiled by Coalition Development Ltd.

Global revenue from that business across 12 of the largest firms dropped to a total of US$9.2bil in 2017, the lowest since at least 2006, the data show.

“They’re pretty significant on the institutional side,” said Larry Tabb, founder of market research firm Tabb Group LLC. Still, intense competition among brokers meant the bank’s clients would have plenty of other options, he said.

Sewing and Garth Ritchie, the head of the investment bank who built his career in cash equities, are currently reviewing all operations of the division, particularly the US operations, according to people familiar with the matter. — Bloomberg

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