Discover your dream Career
For Recruiters

Deutsche Bank traders are tiring as the bank keeps hiring

Deutsche Bank doesn't announce its bonuses for a while, but when it does, today's fourth quarter results from the German bank make it clear who will expect to get paid: the rates traders, the FX traders and the emerging market (EM) traders; but possibly not anyone in credit trading.

As the chart below shows, Deutsche Bank's fixed income currencies and commodities (FICC) traders grew revenues at a faster rate than almost anyone else in the market last year - only Goldman Sachs' traders did better, and within Deutsche's FICC business it was the rates, FX and EM traders who performed the best. 

"Rates revenues were up over 400%, with Emerging Markets and FX revenues significantly higher," says Deutsche CFO James Von Moltke in the prepared comments accompanying today's results. DB's credit traders, however, didn't do so well: they failed to replicate a lucrative distressed debt position in the fourth quarter of 2021, with the result that credit trading revenues were "significantly lower" than the year before. 

Bloomberg reported a few weeks ago that Deutsche Bank will be generous when it comes to traders' bonuses this year, but there's little sign of that in today's results. - Compensation spending increased by a mere €18m in the investment bank between Q4 and Q4, when bonus pools are usually topped up, and although spending on pay was up 8% year-on-year for 2022 as a whole, headcount was up 7% too. 

Deutsche Bank was one of last year's big hirers, particularly in sales and trading. It kept recruiting from Credit Suisse's disaffected credit trading team right into the fourth quarter, whilst simultaneously raiding the likes of Morgan Stanley for rates hires. Net, the bank ended 2022 with 71 more people in the front office than it began, and with 464 more people across the investment bank as a whole. 

Signing bonuses for new hires don't usually come from bonus pots, but compensation for existing DB traders may be squeezed all the same as costs rise in the investment bank. - In Q4 2022, the cost income ratio hit 89% compared to just 62% a year earlier.

Deutsche's fixed income traders have become a crucial driver of both revenues and returns across the bank. As today's presentation notes, the "transformation" of the fixed income trading business has helped drive the return on tangible equity in the investment bank to 9%, up from 2% in 2018. However, there are signs that they're flagging: DB's FICC revenues declined 31% between Q3 and Q4. And Deutsche's own banking analysts predict that FICC revenues across the industry will fall in 2023. 

Coupled with a year in which Deutsche's M&A bankers did better than the rest of the market (the chart below isn't very clear, but shows their mere 1% decline in revenues), this threatens to make Deutsche's 2023 bonus round more complicated than it seemed.

It also means that more cost-cutting may be needed in the investment bank soon. Deutsche said today that it wants to generate "further incremental cost savings" across the bank before 2025 in addition to the €2bn it announced last year. These will come from, "a more efficient workforce structure, including but not limited to reviews of layers, cost per seat and location," and the 'streamlining' of "non-client facing divisional functions and infrastructure teams."

Click here to create a profile on eFinancialCareers. Make yourself visible to recruiters hiring for top jobs in technology and finance. 

Have a confidential story, tip, or comment you’d like to share? Contact: sbutcher@efinancialcareers.com in the first instance. Whatsapp/Signal/Telegram also available (Telegram: @SarahButcher)

Bear with us if you leave a comment at the bottom of this article: all our comments are moderated by human beings. Sometimes these humans might be asleep, or away from their desks, so it may take a while for your comment to appear. Eventually it will – unless it’s offensive or libelous (in which case it won’t.)

author-card-avatar
AUTHORSarah Butcher Global Editor

Sign up to Morning Coffee!

Coffee mug

The essential daily roundup of news and analysis read by everyone from senior bankers and traders to new recruits.

Boost your career

Find thousands of job opportunities by signing up to eFinancialCareers today.
Recommended Articles
Recommended Jobs
Kite Human Capital
Credit Market/ Fixed Income Sales - Electronic Trading
Kite Human Capital
London, United Kingdom
Mason Blake
FX Trader
Mason Blake
London, United Kingdom
Mason Blake
Global Equity Analyst
Mason Blake
London, United Kingdom

Sign up to Morning Coffee!

Coffee mug

The essential daily roundup of news and analysis read by everyone from senior bankers and traders to new recruits.