Deutsche loses top 3 slot in investment bank rankings - Financial Times

Deutsche loses top 3 slot in investment bank rankings

JPMorgan and Goldman head benchmark industry league table

Deutsche Bank has lost its position as a top three global investment bank — an accolade it has held since before the financial crisis — after the weak euro and the bank’s restructuring relegated Germany’s biggest bank into fifth place in a benchmark industry league table. 

The latest data from industry research house Coalition, which rank global investment banks by total revenue from fees and trading, show Deutsche Bank is now behind Citigroup and Bank of America, which both shared the number three spot with the German bank last year. 

JPMorgan retains its title at the top of the league tables, followed by Goldman Sachs, which consolidated its hold on second place after a strong performance in G10 rates trading, cash equities and G10 foreign exchange products. 

Ram Nayak, Deutsche Bank’s head of fixed income, said the results were “not surprising”, adding: “They reflect a well-flagged shift in our strategy that has seen us focus on delivering a better quality of service to a smaller number of clients over a more targeted range of products.” 

The bank announced in October that it was cutting 9,000 jobs, pilling out of 10 countries, reducing resources to its markets division and halting some markets activities as part of a five-year strategy designed to restore investor confidence. 

Deutsche Bank had begun making changes earlier in 2015, pulling out of activities including securitised trading. The net effect was a like-for-like 10 per cent reduction in the markets unit’s balance sheet over 2015, which Deutsche believes cost it around 2.5 per cent of its markets revenues. 

The bank was also hurt by Coalition’s convention of converting revenues to dollars, since Deutsche Bank earns a greater share of its income in euro and sterling, which both depreciated against the dollar in 2015. 

With as little as a few hundred million dollars — or a few percentage points — separating the banks at the top of the league table, Deutsche Bank could reappear in the top 3, though management’s ambition is for the investment bank to hit return targets rather than absolute growth or size targets. 

Deutsche’s corporate banking and securities division actually grew total revenues by 4 per cent last year, but the fourth quarter was a bruising one as was the first quarter of 2016, when analysts expect the bank to have suffered a sharp fall in trading revenues. 

Goldman Sachs held the number two position globally for the second year in a row. Pablo Salame, co-head of Goldman’s securities division, said the US bank had adapted “aggressively” to the significant change that regulations and technology had brought to the industry. 

Last year was the best for Goldman’s investment banking division since 2007. Its fixed income division suffered a 13 per cent fall in revenues last year — a good performance relative to rivals — while equities revenues were up 16 per cent. 

The league tables also showed 2015 was a good year for France’s investment banks, even though they are ranked number 11 and 12 respectively, occupying the bottom two slots. BNP Paribas and Société Générale had the biggest year-on-year revenue gains on constant currency basis, Coalition’s research shows. 

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