Deutsche Bank’s fixed-income traders helped propel its investment bank to an 11% rise in the second quarter, even as the bank posted sharp falls in trading fees.
The German lender posted revenue of €2.6bn at its investment bank in the three months to the end of June, which beat analysts’ expectations and rose 11%. €2.4 billion in fixed income trading revenue rose 32% in the period and ahead of market predictions.
The bank said revenue within its rates, foreign exchange and emerging markets business units more than doubled from a year earlier, offsetting declines in credit trading.
However, Deutsche Bank made just 21 million euros in its key debt origination business, a 95% decline, which it said was due to a 150 million euro reduction in its unit of leveraged financing. Its M&A fees rose 50% to €166 million, but it was still below market expectations for such fees.
TO READDeutsche Bank’s fixed-income trading unit boosts profits
After a hiring boom in 2021, when banks amassed a record $130 billion, according to data provider Dealogic, activity has slowed as market volatility has frozen deals of variable income and macro issues such as rising inflation have affected the appetite for mergers and acquisitions.
Banks such as Goldman Sachs and Morgan Stanley have slashed wages at their investment banks to reflect muted market conditions. However, Deutsche Bank has spent €1.2 billion on compensation in the first six months of 2022, which is a 13% increase over the previous year.
Chief Financial Officer James von Moltke told reporters the bank had set aside more compensation in the first six months to reflect performance. He added that it was a “leverage” to manage costs and that compensation decisions could change by the end of the year.
Von Moltke said the bank was still hiring and was not going to “stifle investment” in the business after a period of expansion.
“With our best half-year profits since 2011, we have demonstrated, once again, that we can deliver growing growth and profits in a challenging environment,” CEO Christian Sewing said in a statement.
Overall, Deutsche Bank made a profit of 1.2 billion euros, which is a 46% increase compared to the same period in 2021. This beat analysts’ predictions of 950 million euros.
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