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Morning Coffee: Time to be apprehensive at Deutsche Bank. The curious route to the top in equities

Deutsche's future is a bit blurry.

Deutsche's future is a bit blurry.

Yesterday started saccharine sweet for employees at Deutsche Bank and then quickly turned sour. They received a pleasant memo wishing them ‘Happy New Year’ from their joint CEOs, but the memo went on to say that Deutsche Bank is preparing to unveil a whole new three year strategy in the second quarter of 2015.

Cue speculation about mass redundancies.

In truth, Deutsche’s new strategy shouldn’t come as a big surprise. The last three year plan – announced in 2012, was due for an update. But as various observers have pointed out, the reappraisal comes at a difficult time. Deutsche Bank’s shares have fallen 35% over the past 12 months and with a return on equity of just 2.8% in the third quarter, the bank is a long way off its target of 12% by 2016.  .

“Things can’t go on like they have until now,” a fund manager owning DB shares told Bloomberg.  Redundancies will be necessary on the Deutsche trading floor, said Alevizos Alevizakos, an analyst at Keefe, Bruyette & Woods.  Deutsche needs to trim its fixed income business, said Guido Hoymann, an analyst with Bankhaus Metzler in Frankfurt. Dirk Becker, of Kepler Cheuvreux in Frankfurt told our German editor that Deutsche may take an axe to its US fixed income traders, who are too costly under new US capital rules.

Deutsche Bank already culled a few traders in the run-up to bonuses at the end of last year. Remaining staff now have months of uncertainty until the new strategy is clarified. Not everyone is pessimistic, however. Neil Smith of Bankaus Lampe in Dusseldorf, said he expects more of the same. And the Wall Street Journal is reporting that is considering a sale of its Postbank unit. If true, this would seem to mark an end to Deutsche’s strategy of diversifying into retail banking.

Separately, Tom Gillie has demonstrated the route to the top of EMEA equities at Bank of America Merrill Lynch. And it involves…four years in FX trading in Asia. Financial News reports that BAML is uprooting Gillie from his Hong Kong-based role as global co-head of FX options trading and making him head of equities trading in EMEA. Senior UBS equities may be disappointed, but Gillie’s move is par for the course – Citi promoted an ex-credit trader to be head of its own European equities business back in September.

Meanwhile:

Deutsche Bank has already said that it’s identifying individual trading businesses to exit. (Bloomberg) 

HSBC ECM bankers might get gigantic $240k bonuses this year. Really? (Bloomberg) 

Nick Bishop, former head of retail sector banking at UBS, has taken this opportunity to join Morgan Stanley as an MD. (Financial Times)

People who found new finance jobs in December allegedly achieved salaries that were 18% higher than in December 2014. (CityAm)

Citi is worth more dead, or broken up, than alive. Soon, management will have to take note. (WSJ)

Bill Gross says he offered to scale back his role. And then Pimco fired him. (Bloomberg) 

JPMorgan analysts reportedly think Goldman’s too small to survive. (ValueWalk) 

JPMorgan is offering women who took time off to look after children an opportunity to join its investment bank (but only in New York for the moment). (Fox) 

JPMorgan analysts say RBS faces a further £6bn hit to its profits from fines over the coming years. (Telegraph)

Standard Chartered needs another $.4.4bn. (Reuters) 

Analysts beware: Robots writing research reports. (Technology Review) 

‘Eligible City bachelors’ confess passions for Victoria’s Secret Models and boho women who also drink champagne. (Evening Standard)

 

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