Deutsche Bank's 20% fixed-income gain beats Wall Street

New York

DEUTSCHE Bank AG saw revenue from fixed-income trading rise by about a fifth in the final quarter of last year, a bigger jump than most of its Wall Street rivals, as chief executive officer (CEO) Christian Sewing increasingly leans on the unit to drive growth.

The bank's traders generated approximately 1.4 billion euros (S$2.25 billion) in the period, a person familiar with the matter said, asking not to be identified, discussing preliminary figures before the company reports earnings this week.

That compares with an average increase of 10 per cent at the five biggest Wall Street banks.

The gain caps a bumper year for the German bank's trading unit, a business Mr Sewing shrank in his revamp of the lender, but which has bounced back in the market volatility caused by the Covid-19 pandemic.

With negative interest rates weighing on the traditional lending business, the CEO has staked his medium-term profitability target on achieving stronger growth in the trading unit than he previously anticipated.

Deutsche Bank said in December that debt trading revenue increased by 10 per cent in October and 23 per cent in November, and Mr Sewing has indicated that at least some of the revenue growth the unit saw throughout 2020 will carry over into this year.

The fixed-income unit is still smaller than most US peers, which averaged US$2.46 billion of revenue in the quarter. The lender exited equities trading in 2019.

The trading revenue would be in line with the consensus estimate. The lender is still expected to post a small annual loss despite the investment bank's performance, largely because its asset disposal unit - which contains the former equities trading unit, as well as illiquid fixed-income derivatives - is forecast to lose 2.2 billion euros.

The bank was considering raising bonuses for traders by an average of 10 per cent, as a way to attract and retain talent, Bloomberg reported in December. That figure may rise given the fourth-quarter performance, a source said.

Deutsche Bank is scheduled to report fourth-quarter earnings on Thursday. The lender will probably also provide an outlook on growth expectations in trading and across the company for the current year, with analysts and shareholders keen to know how long the recent gains will continue. BLOOMBERG