Deutsche Bank and Credit Suisse have a few similarities when it comes to the performance of their trading businesses: both saw revenues shrink dramatically last year, especially in equities; both are trying to do something about it.
Deutsche Bank's strategy for recouping fixed income market share involves pursuing corporate clients instead of institutional clients. In equities, DB says it wants to recoup market share, but so far seems to be doing so by cutting rather than hiring - 17% of staff in its equities unit were cut in February.
Credit Suisse's strategy is about cutting another $400m in costs from the global markets division alone during 2018, whilst achieving returns of 10% to 15% (compared to 0.4% in 2016) and hiking revenues to CHF6bn from (CHF5.5bn in 2016). Credit Suisse CEO Tidjane Thiam wants to make the most of the high returns on offer in Credit Suisse's 'systematic market making group.' At the same time, however, Credit Suisse is rebuilding its traditional equities business under Mike Stewart, who's just joined in NY as global head of equities.
Is now a good time to accept an equities trading job at Credit Suisse? Deutsche Bank's banking analysts suggest it might be.
As the chart below, from Deutsche, shows, Credit Suisse has been losing market share in fixed income currencies and commodities (FICC) sales and trading and equities sales and trading for several years. In equities, the rout began in 2013 and has persisted. In fixed income, it began in 2014 and leveled off last year.
Deutsche analysts say Credit Suisse's fixed income business benefited from its comparative focus on credit trading instead of macro (rates and FX) trading since 2016. So far this year, credit trading revenues have remained strong while macro trading revenues have faltered. However, Deutsche thinks Credit Suisse's credit trading business is unlikely to experience much more of a boost in 2017: the best could be behind it.
Equities trading is a different matter. As Deutsche's analysts noted last week, equities trading and equity capital markets look primed to do well for the remainder of this this year. And Credit Suisse looks particularly primed to benefit: Deutsche says the Swiss bank's sales and trading business is comparatively more skewed towards equities than rivals.
Credit Suisse insiders say the bank wants to be in the top five globally in equities. In the U.S. it ranks around sixth, but in Europe it’s fallen to eighth or even ninth place. Additional hires are expected as the bank rebuilds.
Some of those hires might come from Deutsche Bank. Last month, Credit Suisse poached Stuart McGuire, a senior equities salesman from Deutsche in London. As CS continues to recruit, Deutsche might therefore be better off playing down the advantages of its Swiss rival. McGuire's due to arrive in the third quarter, and could well be inclined to invite some of his former DB colleagues to join him.
Market share trends for Credit Suisse's investment bank