Deutsche Bank foresees challenging 2014 after surprise loss

Investment Bank

The investment banking and trading unit saw its revenue slide 27% to 2.46 billion euros in the fourth quarter from the same period of 2012. The decline was led by a 31% drop in debt trading income. Revenue from trading equities rose 8% and that from advising clients on acquisitions and securities sales was “stable,” the bank said.

“The worry is fixed income revenues that were down,” said Christopher Wheeler, an analyst with Mediobanca SpA, who recommends investors sell the stock. “Comparing that to their U.S. counterparts who reported last week, that is much, much weaker.”

The five biggest U.S. investment banks saw their total revenue from trading fixed income, currencies and commodities, a mainstay of the business, fall 4.2% to $10.2 billion, data compiled by Bloomberg Industries show.

Losing Share

Deutsche Bank generated 15% of its revenue from trading debt and other products in the fourth quarter of last year compared with 27% in 2012.

“You will see us drop off in revenue league tables, but not materially,” Jain said. “The stats that we’re targeting most carefully is our market share in businesses that we’re committed to, which has not budged. Indeed it has even gone up.”

The U.S. will probably continue to outpace Europe in debt trading for several years “so undoubtedly we do have to look at our U.S. versus European size of platform and continue to reinvest,” Jain said.

Deutsche Bank said its transaction banking and money management units were profitable in the final three months of last year after posting losses in the fourth quarter of 2012. Pretax profit at its retail banking unit declined 24% from a year previously.

Moody’s Investors Service lowered its outlook on Deutsche Bank’s credit rating to negative last month, saying the company’s plan to reorient its business and boost profitability has been hampered by rising litigation-related expenses.

Jain and co-CEO Juergen Fitschen, 65, are “confident” the bank can reach profitability and capital targets they set for 2015, according to the statement published yesterday.

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