Corporate Banking & Securities

Recalibrating the business in a changed environment


Ann Marie Petach, Senior Managing Director, Client Solutions, BlackRock, New York (photo)

In this changing regulatory environment, Deutsche Bank has been a trusted partner, providing thought leadership and proactive solutions for the buyside.

Ann Marie Petach,
Senior Managing Director, Client Solutions, BlackRock, New York

For the Corporate Banking & Securities (CB&S) Corporate Division, the challenging macroeconomic environment continued in 2012, driven by the ongoing eurozone crisis, especially in the first half of the year, as well as lower growth rates in emerging and advanced economies. This was compounded in the second half of the year by U.S. budget worries in connection with a possible fiscal cliff. Furthermore, the industry was confronted with new regulatory pressures, while facing concerns about its reputation.

In 2012, two new Co-Heads were appointed and a realignment of CB&S was initiated. By undertaking these changes, we intend to ensure that the division can efficiently deal with the challenges to come over the next few years and succeed against the competition. Within the first 100 days of its appointment in June, the new CB&S management team defined the strategic direction and long-term objectives for the Markets and Corporate Finance Business Divisions. The strategy for these divisions was the result of a detailed evaluation of the entire spectrum of business activities and builds on the existing strength of the businesses, while taking into account the new economic environment, changing competitive landscape and additional regulatory requirements. Focus on profitable growth as well as our core businesses and efficiency will define the strategic direction of CB&S in the future, in full alignment with Deutsche Bank’s corporate culture and values. In 2012, the business divisions in CB&S launched numerous initiatives to achieve its objectives. As a result, CB&S aims to be able to deliver a cost/income ratio of less than 65 % and a fully loaded Basel 3 post-tax return on equity of approximately 15 % by 2015.

CB&S maintained its position as a world leading investment bank in 2012, despite further risk reduction. In recognition of its achievements, Deutsche Bank won numerous awards in 2012, including the title Best Global Investment Bank from Euromoney magazine.

Excerpt from segment reporting (Corporate Banking & Securities1)

The Corporate Banking & Securities Corporate Division recorded income before income taxes of € 2.9 billion in 2012 (2011: € 3.7 billion). Noninterest expenses were € 12.6 billion, a substantial increase of € 2.3 billion compared to € 10.3 billion for 2011. Approximately half of the increase related to the impairment of intangible assets. The increase also included € 315 million in costs-to-achieve for our Operational Excellence Program as well as adverse foreign exchange rate movements and higher litigation-related charges.

 

 

 

in € m.

2012

2011

1

Excerpt from segment reporting. For notes and other detailed information, see Financial Report 2012 (Management Report).

Net revenues

15,648

14,109

Total provision for credit losses

121

90

Noninterest expenses

12,637

10,341

Income before income taxes

2,874

3,657

Return on equity (pre-tax) in %

16

25

Risk-weighted assets

124,939

155,302

Assets

1,475,090

1,591,863

Markets

Markets: maintaining our leadership position in global fixed income

Markets: maintaining our leadership position in global fixed income (bar chart)

The Markets Business Division combines the sales, trading and structuring of a wide range of financial market products, including bonds, equities and equity-linked products, exchange-traded and over-the-counter derivatives, foreign exchange, money market instruments, securitized instruments and commodities. Coverage of institutional clients is provided by the Institutional Client Group, while Research provides analyses of markets, products and trading strategies.

Markets performed well in 2012, reflecting the stability and efficiency of our businesses. We were able to increase market share across most business lines and regions around the world, resulting in a higher global market share in Cash Equities and Global Fixed Income trading.

In 2012, Markets was ranked No.1 by Greenwich Associates in global fixed income and U.S. fixed income based on market share. For the fifth year in a row, Deutsche Bank was voted the leading global prime broker in more areas of the market than any other bank in Global Custodian’s 2012 survey, while The Banker magazine awarded Deutsche Bank the title Bank of the Year for Prime Brokerage.

In our Foreign Exchange business, client-driven volumes reached a record level in 2012. Despite a difficult environment for the overall foreign exchange market, our business volumes increased 25 % year-on-year. This growth reflects Deutsche Bank’s continued investment in the foreign exchange business, including the development of the app-based access to our products and services, such as the new Autobahn App Market platform. However, revenues were impacted by the continued reduction in margins. With a market share of 14.6 %, Deutsche Bank ranked No. 1 in Euromoney’s forex market survey for the eighth year in a row and continues to hold a significant lead over second place. Money market revenues in 2012 were lower than the prior year, due to lower volatility and thus less market activity.

Markets: maintaining our position as world leader in foreign exchange

Markets: maintaining our position as world leader in foreign exchange (line chart)

In 2012, CB&S combined its Rates and Flow Credit Trading with the aim of achieving increased efficiency and cost savings. Revenues in the combined unit rose significantly compared to the prior year, driven in particular by successful business in Flow Credit Trading. Deutsche Bank was named Credit Derivatives House of the Year by Risk magazine, while also winning the awards for Interest Rate Derivatives House of the Year and Hedge Fund Derivatives House of the Year. Euromoney awarded us the title No. 1 Interest Rate Derivatives Dealer.

Structured Finance provides structured risk and non-standardized financing solutions for clients across multiple industries and asset classes. The global footprint, breadth of products, depth of experience and success in executing complex transactions for clients make Deutsche Bank’s Structured Finance an industry leader. 2012 revenues were higher compared to 2011 due to increased client demand for structured finance solutions.

Revenues in our Emerging Markets trading business in 2012 were in line with the prior year. Our market flow business in fixed income performed well, while our businesses in structured products and derivatives recorded lower earnings than in 2011.

In Commodities, revenues were lower compared to the strong performance in 2011, reflecting lower commodities prices in the first six months of 2012 and the impact of Hurricane Sandy towards the end of the year. Deutsche Bank was awarded the titles Best Global Commodities House by Euromoney and Commodity Derivatives House of the Year by International Financing Review. Energy Risk magazine named Deutsche Bank Derivatives House of the Year, Structured Products House of the Year and Freight House of the Year.

Markets: strengthening our position in cash equities trading

Markets: strengthening our position in cash equities trading (line chart)

Equities sales and trading revenues in 2012 were in line with those of 2011, as increased market share made up for overall lower market activity. Revenues in our Cash Equities business remained at around the level of 2011, thanks to an especially strong performance in North America and market share gains in Europe in line with the prior year. In Cash Equities, Deutsche Bank was named No. 1 in Equities Research in Europe and Asia excluding Japan by Greenwich Associates. For the first time, Deutsche Bank ranked top five for U.S. equity research in Institutional Investor’s 2012 All America Research Team survey. This achievement demonstrates our increasing strength in the U.S. equities market.

Equity Derivatives revenues were significantly higher year-on-year, primarily due to the absence of prior year losses. Our performance here was particularly strong in North America and Europe.

Our Prime Brokerage franchise, which supports our business with hedge funds, was named the Most Innovative Bank for Prime Brokerage by The Banker in its annual investment banking awards, and we were awarded the title Best Global Prime Broker by Euromoney.

Corporate Finance

The Corporate Finance Business Division handles mergers and acquisitions (M&A), debt and equity issuance and advisory as well as capital markets coverage for large and medium-sized corporations. Industry-specialized and regional teams ensure that our clients receive the entire range of our financial products and services.

Corporate Finance: highest ever market share based on fees

Corporate Finance: highest ever market share based on fees (bar chart)

The global Corporate Finance fee pool was up 5 % in comparison to 2011, despite the market uncertainty and volatility related to the sovereign debt crisis. Record issuance levels in both the high yield and investment grade bond markets contributed to the good levels in fee income. The Corporate Finance division delivered a strong performance during this period, achieving a global top 5 ranking, based on fees. We maintained our position as the market leader in Europe, the Middle East and Africa (EMEA) and gained market share in the U.S. (source: Dealogic). In 2012, Deutsche Bank was named the Bond House and Equity House of the Year by the International Financing Review.

In an outstanding market environment for our Debt Capital Markets business, we were the No. 2 bookrunner of international bonds according to Thomson Reuters. This strong market position reflects our ability to adapt to a changing market in which our clients are increasingly issuing bonds in different regions and currencies depending on their needs and the market conditions.

In Leveraged Debt Capital Markets, we capitalized on market growth, increased our market share and achieved a No. 4 ranking at the global level, while maintaining our conservative risk profile. Our business mix was well-balanced between financial sponsors, mainly private equity firms, and corporates. Deutsche Bank benefitted from record issuance levels in high yield bonds and took first place in the EMEA region and a top 5 ranking in the USA according to Dealogic.

Equity Capital Markets, our equity financing business, advanced to No. 5 in the global rankings based on fees, and our market share rose to 5.1 %, the highest level since the start of the financial crisis (Dealogic). Deutsche Bank participated as bookrunner in eight out of the ten largest equity capital markets transactions worldwide, reflecting the strength of our client relationships from repeat issuers as well as our ability to leverage our global presence for large cross-border transactions. Against this backdrop, the Financial News named Deutsche Bank European Equity Capital Markets House of the Year.

In our Mergers & Acquisitions (M&A) business, we maintained the momentum from 2011 in 2012. Based on fees, we took second place in Europe, the Middle East and Africa (EMEA) as well as sixth place at the global level (Dealogic). We advised clients on five of the ten largest transactions during the year. Our M&A business also ranked No. 5 in cross-border transactions (Dealogic). When providing advisory services related to the purchase or sale of a company, we also assist our clients in managing a variety of transaction-related risks, e.g. in connection with forex, interest rates and commodities.

Awards 2012

The Banker

Most Innovative Investment Bank in Commodities

Bank of the Year for Prime Brokerage

Risk

Credit Derivatives House of the Year

No.1 in Cross-Currency Swaps and FX Options

No.1 Derivatives House

Euromoney

Best Global Investment Bank

Best Global Prime Broker

Best Global Risk Management House

Best Global Commodities House

International Financing Review

Equity House of the Year

Bond House of the Year