You may recall that Deutsche Bank issued a preliminary statement on its results a few weeks ago. It wasn't pretty. Deutsche made a loss of €965m in the final quarter, when analysts had expected a profit of €700m. In the fixed income currencies and commodities business revenues fell 31% year-on-year.
Ten days later, Deutsche has now released it's full(ish) fourth quarter results and is giving a press conference on what went wrong. If you work for Deutsche, are thinking of working for Deutsche, or like to know what the German bank is up to, here's what you need to know.
Return on equity is the prime concern of banking chief executives these days. The ROE in Deutsche's corporate banking and securities business is not looking good: it fell from 19% in 2011 to a steady 9% in 2012 and 2013. In the final quarter of 2013, ROE was -1% in the corporate and investment bank.
With costs eating up nearly the entirety of Deutsche's corporate and investment banking revenues in Q4, the bank doesn't look in much of a position to hire. However, Q4 2013 was at least an improvement on Q4 2012, when costs were 117% of revenues.
For most of 2013, Deutsche broke out the number of people it employed in the front office at its corporate and investment bank and the number of people it employed in the back office. For the fourth quarter it's only broken out the number of people in the front office, making it impossible to establish what's really happening to total headcount - or to pay per head.
Deutsche likes to dump front office investment bankers in the fourth quarter, just before bonuses are paid. In 2012 it got rid of 489 front office people in Q4. In 2013 it was less harsh and only got rid of 137. [NB: Deutsche dispensed with 251 people in Q1 2013, so Deutsche bankers may want to gird themselves until March.]
Despite the fourth quarter clear-out, Deutsche ended the year with 41 more front office investment bankers than it had at the end of the first quarter, which seems a bit weird when you're supposed to be cost-cutting.
This is already known, but it's worth noting that full year figures show Deutsche's FICC revenues falling 25% year-on-year. By comparison, revenues in JPMorgan's FICC business were stable last year. Deutsche Bank has been losing FICC market share.
Revenues in DB's far smaller and less established equities business rose 20% in 2013 vs. 2012. JPMorgan's equities revenues rose a mere 8%. The German bank seems to have gained equities market share.
Deutsche Bank's advisory business didn't do so well in 2013. Revenues there fell 19% year-on-year. At Morgan Stanley, the comparable drop was just 4%.
Deutsche Bank cut the overall compensation bill in its corporate and investment bank by 14% last year. It's hard to tell how this will pan out for individuals as Deutsche has stopped breaking out total headcount (see point 3). However, with front office headcount up in 2013, it seems likely that some fixed income professionals in particular will be paid significantly less than before.
Managing directors at Deutsche Bank have a large proportion of their bonuses deferred for five years and can only access them in year five. With banks like Citi paying a lot of cash this year, does DB have any intention of dropping its punitive deferral plan? Apparently not. At today's press conference co-CEO Juergen Fitschen said employees had become quite accustomed to the long deferral period.