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Deutsche Bank (DB) Sees Q2 IB Revenues Dip 15% From Prior Year
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Amid the global slump in dealmaking, Deutsche Bank’s (DB - Free Report) management, at a conference, remarked that investment banking (IB) revenues are likely to decline more than 15% on a year-over-year basis.
Notably, the company expects second-quarter fixed-income trading revenues to decline year over year by 15%-20%, owing to tough comps from the prior-year quarter. In second-quarter 2022, it reported €2,385 million in Fixed Income, Currency Sales & Trading revenues.
Nonetheless, the origination and advisory business is likely to be a bright spot as revenues from the business are expected to be flat to up in the second quarter of 2023 on a year-over-year basis. In second-quarter 2022, it reported €232 million in origination and advisory revenues.
The company’s corporate finance advice and underwriting business management noted, "We think we've started to find the floor, which is encouraging.”
In efforts to improve profitability, the company remains focused on cost management. In fact, total noninterest expenses recorded a negative compound annual growth rate (CAGR) of 6.7% over the last three years (ended 2022). Earlier, the bank expected noninterest expenses in 2023 to be flat compared to 2022.
The company is dedicated to reduce its cost base by identifying additional cost-saving endeavors. These initiatives are expected to provide structural cost savings of more than €2 billion between 2022 and 2025. By 2025, DB expects the cost/income ratio to be below 62.5%.
Deutsche Bank is also shifting focus from IB to more stable businesses, like private banks, corporate banks and asset management units. This is likely to aid revenues in the upcoming period.
Over the past six months, shares of DB have increased 1.1% on the NYSE compared with the industry’s rise of 13.6%.
Amid a challenging economic scenario, Morgan Stanley’s (MS - Free Report) trading and investment banking outlook too looks bleak for the near term.
Morgan Stanley’s co-president, Andy Saperstein, said that the firm expects a year-over-year decline in its trading and investment banking revenues in the second quarter of 2023.
Saperstein believes that because of a more challenging economic environment, Morgan Stanley’s sales and trading “results will be notably down year over year versus a strong second quarter last year,” while “investment banking is also very challenged."
Because of this challenging economic environment, Morgan Stanley has been compelled to reconsider its headcount. MS has been considering cutting around 7% of jobs in the Asia-Pacific region (excluding Japan). This is part of the broader 3,000 IB job cuts that the company announced earlier.
Citigroup Inc. (C - Free Report) expects a year-over-year decline in its trading and IB revenues in second-quarter 2023. At an industry conference, Mark Mason, the chief financial officer of Citigroup, said that trading revenues and IB revenues had been down 20% and 25%, respectively, so far this quarter.
A slowdown in business activities has compelled the bank to reduce headcounts and expenses. C will reduce its headcount by 5,000 across the firm, primarily in the banking, markets and functions divisions.
Mark Mason said the firm’s recent job cuts will cause expenses to climb as much as $400 million this quarter compared with the first three months of the year. Mason expects the bank's expenses in the second quarter of 2023 will be in the range of $300-$400 million higher sequentially, primarily attributed to severance costs tied to the leaving of 1,600 employees.
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Deutsche Bank (DB) Sees Q2 IB Revenues Dip 15% From Prior Year
Amid the global slump in dealmaking, Deutsche Bank’s (DB - Free Report) management, at a conference, remarked that investment banking (IB) revenues are likely to decline more than 15% on a year-over-year basis.
Notably, the company expects second-quarter fixed-income trading revenues to decline year over year by 15%-20%, owing to tough comps from the prior-year quarter. In second-quarter 2022, it reported €2,385 million in Fixed Income, Currency Sales & Trading revenues.
Nonetheless, the origination and advisory business is likely to be a bright spot as revenues from the business are expected to be flat to up in the second quarter of 2023 on a year-over-year basis. In second-quarter 2022, it reported €232 million in origination and advisory revenues.
The company’s corporate finance advice and underwriting business management noted, "We think we've started to find the floor, which is encouraging.”
In efforts to improve profitability, the company remains focused on cost management. In fact, total noninterest expenses recorded a negative compound annual growth rate (CAGR) of 6.7% over the last three years (ended 2022). Earlier, the bank expected noninterest expenses in 2023 to be flat compared to 2022.
The company is dedicated to reduce its cost base by identifying additional cost-saving endeavors. These initiatives are expected to provide structural cost savings of more than €2 billion between 2022 and 2025. By 2025, DB expects the cost/income ratio to be below 62.5%.
Deutsche Bank is also shifting focus from IB to more stable businesses, like private banks, corporate banks and asset management units. This is likely to aid revenues in the upcoming period.
Over the past six months, shares of DB have increased 1.1% on the NYSE compared with the industry’s rise of 13.6%.
Image Source: Zacks Investment Research
Currently, DB carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Amid a challenging economic scenario, Morgan Stanley’s (MS - Free Report) trading and investment banking outlook too looks bleak for the near term.
Morgan Stanley’s co-president, Andy Saperstein, said that the firm expects a year-over-year decline in its trading and investment banking revenues in the second quarter of 2023.
Saperstein believes that because of a more challenging economic environment, Morgan Stanley’s sales and trading “results will be notably down year over year versus a strong second quarter last year,” while “investment banking is also very challenged."
Because of this challenging economic environment, Morgan Stanley has been compelled to reconsider its headcount. MS has been considering cutting around 7% of jobs in the Asia-Pacific region (excluding Japan). This is part of the broader 3,000 IB job cuts that the company announced earlier.
Citigroup Inc. (C - Free Report) expects a year-over-year decline in its trading and IB revenues in second-quarter 2023. At an industry conference, Mark Mason, the chief financial officer of Citigroup, said that trading revenues and IB revenues had been down 20% and 25%, respectively, so far this quarter.
A slowdown in business activities has compelled the bank to reduce headcounts and expenses. C will reduce its headcount by 5,000 across the firm, primarily in the banking, markets and functions divisions.
Mark Mason said the firm’s recent job cuts will cause expenses to climb as much as $400 million this quarter compared with the first three months of the year. Mason expects the bank's expenses in the second quarter of 2023 will be in the range of $300-$400 million higher sequentially, primarily attributed to severance costs tied to the leaving of 1,600 employees.