The business figures presented by the major Wall Street banks over the past few days are anything but optimistic.
After benefiting from the booming business on the financial markets for long stretches of the corona pandemic, JP Morgan, Goldman Sachs and Citi all had to report surprisingly weak numbers for the last three months of 2021.
Income fell, especially in the bond business.
On Wednesday, Morgan Stanley and Bank of America closed the balance sheet round with some significantly better figures than expected.
But here, too, one number stood out in particular: Morgan Stanley earned almost a third less than a year ago in trading in fixed-income securities, currencies and commodities.
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This is bad news for Deutsche Bank.
Since leaving stock trading, your investment bank has consisted almost exclusively of dealing in fixed-income securities and foreign exchange.
In the first nine months of 2021, it earned more income than the corporate bank and asset management combined.
When states and corporations stocked up on bonds because of the corona crisis, profits bubbled up.
But when bank boss Christian Sewing presents his annual figures next Thursday, he will have to prove how resilient the bank is to a slowdown in this business.
Competitors increase bonuses
All in all, the analysts expect an average pre-tax profit of 3.5 billion euros, as can be seen from the consensus report that has now been published. In it, the bank summarizes the expectations of 14 analysts. 3.5 billion euros – that would be the first real billion-dollar profit in many years. But in view of the 3.3 billion euros that the institute had in the till after just nine months, the analysts' expectations also speak for a very weak final quarter. It would be trending after the bank earned 1.6 billion euros in the first quarter, 1.2 billion in the second quarter and 550 million in the third.
The shareholders are now primarily looking at how well Sewing has the costs under control.
According to him, most of the expenses for the major restructuring of the bank have already been digested.
But in day-to-day business, investment bankers in particular have become significantly more expensive.
After the big profits they've raked in, they also demand big bonuses.
Goldman Sachs just boasted that it paid out 30 percent more salaries and bonuses for the past year.
JP Morgan boss Jamie Dimon pointed to the fierce competition for the best minds.
In the Deutsche Bank environment, there is talk that the bonus pot in the most important departments is likely to increase by 20 percent.
Moved away from the cost target
When Sewing presented his austerity measures for the bank in the summer of 2019, he wanted to reduce the costs by six billion to 17 billion euros by 2022. In the meantime, he even tightened the target to 16.7 billion euros, but quickly moved away from it again: Instead of an absolute number, he now wants to achieve a cost-income ratio of 70 percent by the end of this year. With higher yields, the costs may also be higher. A year before the reporting date, however, both the expectations for costs at 19.3 billion euros and for the cost-income ratio at 84 percent are still a long way from the targets.
Above all, rising interest rates give hope.
They could finally give the bank better returns in business with private and corporate customers and had recently boosted the share price.
Kian Abouhossein, who monitors the European banking sector for JP Morgan, bases his current positive assessments primarily on the recent increase in bond yields.
Alongside Swiss UBS and Italian Unicredit, he counts Deutsche Bank among his favourites.
The bank has already received support from its fund subsidiary.
A few days ago, DWS had to announce ad hoc that its business figures for 2021 were significantly better than expected.
In the bank's consensus report, its earnings contribution in the fourth quarter was EUR 205 million, but it is actually EUR 387 million.Keywords: