Now do you think that it was a matter of getting cut out or of being unable to support their participation???
Financial Times
By Alice Ross
and Daniel Schäfer
20 September 2013
Deutsche Bank is set to warn that a recent slowdown in fixed income trading will drag down revenue growth in the third quarter, adding to the gloom among investment banks about conditions in the debt markets.
The German-based bank is expected to give an update on trading conditions next week at a banking conference in London, where its co-chief executive Anshu Jain is due to speak on Wednesday. Mr Jain is expected to confirm that revenues in the bank’s fixed income division are likely to be lower than in the third quarter of 2012.
Mr Jain’s comments will add to warnings from senior executives at other investment banks, including Barclays, Credit Suisse and Jefferies, that a slowdown in bond trading has hit their earnings in the third quarter.
The traditional summer lull was compounded by concerns over Syria leading to a withdrawal of market liquidity. Deutsche Bank declined to comment.
Bankers are also warning that third-quarter results will suffer by comparison with the same period of last year, when the European Central Bank’s promise to do “whatever it takes” to save the euro led to a flurry of activity in the fixed income markets.
Last week, David Mathers, Credit Suisse’s chief financial officer, warned investors that the bank’s fixed income trading performance had suffered from a market decline this summer.
“We have seen continued volatile fixed income market conditions in July and August, which has exacerbated the normal seasonal slowdown in trading volumes, and thus adversely impacted our fixed income business,” Mr Mathers said.
Earlier this week US investment bank Jefferies reported an 83 per cent fall in net income in its fiscal third quarter – which ended in August – on the back of lower bond revenues.
The US bank said the drop was due to the rising interest rate environment, widening spreads, redemptions from bond funds that muted trading and related writedowns within Jefferies’ inventory.
Analysts said many banks would only partly be able to compensate the slowdown in bond trading with rising revenues in their equities trading and advisory businesses.
European banks including Deutsche Bank have also struggled with a less robust economy in the eurozone compared with their counterparts in the US.
Observers say the pick-up in market activity after the US Federal Reserve decided this week not to immediately reduce its quantitative easing programme is unlikely to have a significant impact on banks’ third-quarter results.
Shares in Deutsche Bank fell in July after the bank revealed a drop of nearly 50 per cent in net profits in the second quarter compared to the same period in 2012, confounding analysts’ predictions of a rise.
Deutsche Bank is in the process of shedding up to €300bn in assets to meet tougher regulatory requirements on leverage ratios, which require banks’ equity to be at least 3 per cent of their total assets. The bank’s chief financial officer, Stefan Krause, told reporters at a business conference in Frankfurt earlier this week that the group expected to report good progress on its balance sheet reduction measures in its third-quarter results, which will be announced on 29 October.
Investors will also be keen to hear whether Mr Jain gives any update on Deutsche Bank’s litigation provisions, following recent high-profile regulatory fines for JPMorgan after its “whale”-trading incident.
Deutsche Bank revised its 2012 profits downwards in March after setting aside an extra €600m for mortgage litigation in the US.
The bank has also set aside €500m towards expected penalties in relation to global regulators’ investigations into the rate-rigging scandal that has already seen banks including Barclays, UBS and Royal Bank of Scotland fork out hundreds of millions in fines.
original article found here
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