Deutsche Bank is going against the flow. While rival banks ramp up spending on technology and reduce investment in headcount, the German bank indicated today that it plans to cut technology costs in future, but to continue hiring top traders.
"We do believe that we will be able in time to reduce our technology expenses," said Deutsche Bank CFO James Von Moltke, talking about the bank's second quarter results today. "It's part of our planning for 2022 and beyond."
Deutsche allocated 19% of its operating expenditure to IT last year according to analysis by JPMorgan. This was less than banks like BNY Mellon and BNP Paribas, but more as a proportion of expenses than JPMorgan or Goldman Sachs.
Von Moltke said Deutsche has invested heavily in IT after years of underspending, and that the "large scale investments" that have been made in recent years will result in significant savings in the future. "One of the benefits of the investments we've been making, whether in data or the transition to cloud is that the efficiency of the investments is accelerating," he added. "The next 18 months will be a critical period for that execution and for delivering the benefits we've been working on for several years."
While Deutsche looks to cut its spending on technology, Von Moltke and CEO Christian Sewing said today that the bank will continue investing in areas like sales and trading. Fixed income trading in particular had a good second quarter at the German bank - dropping by just 11% year-on-year (although this increases to 19% when a one off gain is eliminated).
Sewing said the bank wants to grow in the segments where it is "now playing" like financing, rates, FX, and emerging markets. "This is where we are investing in people and technology," he said, adding that Deutsche has made, "the right people choices and the right investments" in these businesses for the past five or six quarters, and that he doesn't see this coming to an end.
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