Deutsche Bank AG's investment banking business picked up in August and early September after a sluggish start to the third quarter, and a continued focus on costs should ensure more sustainable revenues in the future, according to the division's head.
Speaking at the Barclays Global Financial Services Conference on Sept. 14, Mark Fedorcik said July started "pretty muted for the markets in general," but that activity picked up thereafter. Deutsche's investment bank registered "robust activity" in its financing and origination and advisory business.
It is aiming for a revenue run-rate of €2 billion to €2.5 billion per quarter, an expectation that Fedorcik reaffirmed despite some potential seasonality.
Over the last couple of quarters, the investment bank has performed solidly. Net revenues at the division hit €3.10 billion in the quarter ended March 31, rising more than 30% year over year. Then in July, Deutsche reported its best second-quarter and first-half results — for the whole group, not just the i-bank — since 2015, with the investment bank posting net revenues of €2.39 billion.
For the full year 2021, Fedorcik said, investment banking revenues would be in line with the previous year's. The figure hit €9.29 billion in 2020, versus about €7 billion in 2019.
Asked about the sustainability of the revenues, Fedorcik pointed to a "fantastic" fixed-income franchise and a continued focus on costs.
In the third quarter of 2019, when the bank announced its sweeping strategic overhaul, noninterest expenses amounted to €1.57 billion. These dropped by 15% to €1.35 billion in the second quarter of 2021.
For the whole group, the cost-to-income ratio target is 70%. For the investment bank, it is 56% for 2022, and Fedorcik said it is on track to meet that target. Cost-cutting efforts include staff reductions in the front office and decommissioning certain apps and workflow tools. The reengineering of fixed-income and currency activities also are expected to cut costs.
The executive said he is building a business that is "boring and repeatable every quarter with sustainable revenues."
Deutsche Bank is now able "to run the same play quarter after quarter," Fedorcik said.