Corporate Banking & Securities

Efficient use of resources for sustainable growth

In brief

  • Business processes optimized, complexity reduced
  • Strong momentum in equities trading
  • Difficult conditions for fixed income business
  • Corporate Finance consolidating market share
Mohammed Sharaf, Group Chief Executive Officer, DP World, Dubai (photo)

»In a changing world, Deutsche Bank has been a true partner. We both actively pursue our passion to deliver long-term sustainable and profitable growth through excellence in customer service and innovation.«

Mohammed Sharaf,
Dubai, Group Chief Executive Officer, DP World

Deutsche Bank’s commitment in the MENA region is more than a century old, beginning with the bank’s financing of the Baghdad railway.

Corporate Banking & Securities (CB&S) comprises the Markets and Corporate Finance Business Divisions. The Markets Business Division combines the sales, trading and structuring of a wide range of financial markets’ 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 analysis of markets, products and trading strategies for clients. The Corporate Finance Business Division is responsible for mergers and acquisitions (M&A) as well as debt and equity advisory and origination. Regional, industry-focused teams ensure the delivery of the entire range of financial products and services to the bank’s corporate clients.

CB&S continued to operate under difficult conditions in 2013. While the U.S. economy grew, challenges such as the Cyprus bailout and political uncertainty in countries such as Italy and Greece continued to hamper Europe’s recovery, especially in the first half of the year. Uncertainty regarding the U.S. “fiscal cliff” and the potential tapering of the Federal Reserve’s quantitative easing program affected investor sentiment in the second half of the year. Furthermore, the investment banking industry was confronted with new regulatory requirements.

Excerpt from segment reporting (Corporate Banking & Securities1)

Corporate Banking & Securities recorded income before income taxes of € 3.1 billion in 2013 (2012: € 2.9 billion). The improvement was driven by the non-recurrence of the impairment on intangible assets recorded in 2012, as well as lower compensation and non-compensation expenses reflecting the continued implementation of OpEx measures, partly offset by lower revenues and higher litigation provisions.

 

 

 

in € m.

2013

2012

Net revenues

13,623

15,448

Total provision for credit losses

190

81

Noninterest expenses

10,353

12,459

Income before income taxes

3,063

2,891

Return on equity (pre-tax) in %

15

14

Risk-weighted assets

118,689

117,056

Assets

1,111,592

1,464,721

1 Excerpt from segment reporting. For notes and other detailed information, see Financial Report 2013 (Management Report).

CB&S maintained its position as a world-leading investment bank and fixed income powerhouse in 2013. Amid a challenging revenue environment for the industry, CB&S revenues were down 12 % versus the prior year. Income before income taxes (IBIT) came in at € 3.1 billion, slightly above the 2012 figure of € 2.9 billion. In recognition of its underlying franchise strength, Deutsche Bank won numerous awards in 2013, including Best Investment Bank in Western Europe from both Euromoney and Global Finance and Most Innovative Bank in Western Europe from The Banker.

CB&S made solid progress in implementing Strategy 2015+, continuing to enhance the focus, scale and efficiency of the platform. This strategy is the result of a detailed evaluation of CB&S activities, identifying strengths and challenges of the businesses, while taking into account the economic environment, changing competitive landscape and additional regulatory requirements. The corporate division selectively restructured certain businesses to position itself for the evolving environment. CB&S is now leaner and more efficient, using less balance sheet and risk-weighted assets, with a reduced headcount and lower overall expenses. In 2013, the corporate division enhanced the governance of technology investments and redesigned key trading systems. Moreover, CB&S strengthened the monitoring of business processes. For example, new restrictions were introduced for electronic communication and employee trading.

Markets

Markets: maintaining our
leadership position in global
fixed income

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

In 2013, the Markets Business Division delivered a weaker performance than in the prior year. Revenues were down 16 % year on year as difficult trading conditions for Debt Sales & Trading were only partially offset by better performance in Equities Sales & Trading.

In 2013, CB&S completed the organizational integration of Rates, Flow Credit Trading, Foreign Exchange and Global Liquidity Management businesses into the Fixed Income and Currencies business (FIC) in order to increase overall efficiency and leverage technology more effectively. Revenues in this combined unit were lower compared to the prior year, primarily due to difficult trading conditions across most products and markets. Despite a significant reduction in resources and the recalibration of its businesses – CB&S total adjusted assets dropped by 12 % – the bank’s market position in the FIC business remained robust. For the fourth time in a row, Greenwich Associates ranked Deutsche Bank’s global fixed income business first place based on market share (Global Fixed Income and U.S. Fixed Income).

In the Foreign Exchange business, the first half of the year saw strong volumes and healthy client demand. The positive development also reflected Deutsche Bank’s improved offering and continued investment in the foreign exchange business, including the further development of app-based access to CB&S products and services. In the second half of the year, revenues fell due to ongoing margin compression and lower market volatility. With a market share of 15.2 %, Deutsche Bank took first place in Euromoney’s foreign exchange market survey for the ninth year in a row, despite the challenging environment.

15.2 %

market share in global foreign exchange trading

Global Liquidity Management (GLM) provides collateralized financing and collateral management services for clients. Revenues in this segment were lower than the prior year due to lower market liquidity and the reduced risk profile following the restructuring of the business.

Core Rates provides clients with a market in interest rate-based financial products, including both flow products and structured solutions. Revenues in this segment were down on 2012 as a result of reduced client volumes, ongoing market uncertainty and weaker liquidity. Deutsche Bank was named Global Flow House (Rates) in the Euromoney Awards for Excellence 2013.

Markets: extending market
leadership in Asia Fixed Income

Markets: extending market leadership in Asia Fixed Income (bar chart)

Flow Credit enables clients to meet their investment objectives and manage credit risk by providing liquidity through a range of products across high yield, investment grade and distressed asset classes. In 2013, Flow Credit revenues remained unchanged on the prior year.

The Structured Finance business delivers structured risk and non-flow financing solutions for clients across multiple industries and asset classes. Thanks to its global presence, breadth of products, depth of capabilities and success in executing complex transactions for clients, Deutsche Bank’s Structured Finance business is an industry leader. Revenues in the 2013 financial year were in line with the prior year. Deutsche Bank was named Most Innovative Investment Bank for Structured Finance by The Banker.

The Emerging Markets business is a globally integrated platform, dedicated to market making in a full range of emerging market debt products (Debt, CDS, Foreign Exchange and Rates) mainly for clients in Latin America and Central and Eastern Europe, the Middle East and Africa. Revenues in the Emerging Markets Trading business in 2013 were higher than the prior year.

In 2013, CB&S announced a significant scaling back of the Commodities business. In future the bank will focus on financial derivatives and precious metals. The decision was driven by the need to deploy capital more efficiently, reduce the complexity of the business and respond to industry-wide regulatory challenges.

Markets: strengthening
our position in U.S. equities

Markets: strengthening our position in US equities (line chart)

In 2013, Equity Sales & Trading revenues were up 20 % on the prior year as global equity markets improved on the back of better global macroeconomic conditions. IBIT increased even more as a number of strategic initiatives resulted in a more efficient equities business. Revenues from Cash Equities rose in 2013, reflecting a more positive market sentiment than in the prior year. In line with this development, Equity Derivatives Revenues were significantly higher year on year, especially in Asia and Europe due to increased client activity. Greenwich Associates ranked Deutsche Bank No.1 in Flow Equity Derivatives and Structured OTC Equity/Securitized Products for European Investors.

The Prime Brokerage business delivers innovative multi-asset financing solutions and access to worldwide markets to the world’s largest and most sophisticated fund managers. Revenues remained stable, in line with the prior year.

Awards 2013

+20 %

revenues in our Equity Sales & Trading

The Banker
Most Innovative Investment Bank in Foreign Exchange
Most Innovative Investment Bank in Structured Finance

Euromoney
Best Global Flow House
Best Global Commodities House
No. 1 Euromoney FX survey, nine consecutive years

Risk
Bank Risk Manager of the Year

Greenwich Associates
No. 1 in Global Fixed Income
No. 1 in U.S. for Fixed Income

Corporate Finance

Corporate Finance: sustained

market share based on fees

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

Corporate Finance delivered a strong performance in 2013, reflecting improved market conditions and solid franchise momentum. Revenues were 17 % higher, with significantly improved overall profitability. The business won three out of the eight top accolades awarded by IFR Magazine, including Best Bond House for the third year in a row.

Global fees in Corporate Finance rose 9 % on 2012, reaching their highest level since 2007. This growth was driven by very strong capital markets activity. Equity Capital Markets (ECM) activity increased by 20 %, with issue volumes hitting their highest levels in the USA for 13 years. The Leveraged Debt Capital Markets (LDCM) business was very robust with the fee pool reaching a record level.

Deutsche Bank’s 2013 market share based on fees remained stable at the record level that was achieved in 2012 (source: Dealogic). At the same time, CB&S succeeded in increasing its market share in the ECM and DCM businesses as well as in the Europe, Middle East and Africa (EMEA) region, where it continued to be ranked No.1. The LDCM business had an outstanding year, achieving an impressive No. 2 global ranking in high yield issuance based on fees.

During M&A assignments, in addition to providing advisory services related to the purchase or sale of companies, CB&S also assists clients with managing a variety of transaction-related risks, such as foreign exchange, interest rate and commodity risk. M&A lost momentum in 2013, with fewer deals, reduced volume and a smaller fee pool.

Outlook

In 2014 CB&S will remain on track to deliver the 2015+ objectives. CB&S will continue to consolidate its strengths in fixed income flow through ongoing platform integration and investments, while executing on its cost, capital and leverage targets. In geographical terms, the corporate division will continue to streamline the business.

Awards 2013

International Financing Review
Bond House of the Year
Loan House of the Year
High-Yield Bond House of the Year