global underwriter of international bonds
- Solid revenue and market share momentum
- Progress on OpEx cost savings initiatives
- Ongoing cultural change
Markets: consolidating the position as leader in global government bonds trading
Corporate Banking & Securities (CB&S) comprises the Markets and Corporate Finance business divisions and offers financial products globally. 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 and securitized instruments. Coverage of institutional clients is provided by the Institutional Client Group, while Research provides analyses of markets, products and trading strategies for clients. The Corporate Finance Business Division is responsible for mergers and acquisitions (M&A) as well as for 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 clients.
CB&S continued to operate under difficult conditions in 2014 as revenue pools remained depressed and the record-low interest rate environment prevailed in many important markets. Also, trading activity was subdued in an environment with low volatility and volumes for most of the year. Volatility picked up in the fourth quarter on the back of rising geopolitical risks and falling oil prices. As the outlook for the U. S. economy improved, U. S. equity markets continued their upswing. The more positive business sentiment also gave momentum to corporate finance, which saw strong activity during the year, particularly in the Equity Capital Markets (ECM) and M&A businesses.
CB&S maintained its position as a world-leading investment bank and performed well in the reporting year, gaining market share while substantially reducing leverage. Despite increased regulation and difficult trading conditions, CB&S revenues were 2 % higher than the prior year, driven by increased revenues across Sales & Trading and Origination & Advisory. Debt Sales & Trading revenues were flat, while Equities Sales & Trading revenues increased 7 % versus the prior year. Costs increased by 2 %, driven by higher regulatory-related spending (including increased compensation expenses due to CRD 4 requirements), investments in the business and a negative impact from foreign exchange movements. CB&S delivered income before income taxes of € 3.3 billion in the reporting year (2013: € 3.2 billion).
Sustained progress on portfolio optimization
CB&S continued to optimize the use of resources across its business, enabling the division to maintain a market-leading client franchise while reducing resources. In 2014, CB&S continued to reduce leverage exposure and headcount, thereby increasing the efficiency of the business. In response to the changing market and regulatory environment, the division continued to evaluate its business portfolio, adapting it to reflect current market opportunities and to meet client needs. In this context, at the end of 2014, CB&S announced its exit from most trading in single-name credit default swaps.
The Markets division continued to reduce leverage exposure in the Fixed Income & Currencies business, while also redeploying resources to its leading Credit Solutions businesses to realize specific market opportunities, for example, in Commercial Real Estate. In Equities, the business remained committed to maximizing the income from its platform and more efficiently deploying resources to serve clients and increase returns, for example, in Prime Finance.
Corporate Finance continued to focus on increasing productivity through the enhanced alignment of client coverage, more efficient allocation of its balance sheet and greater cooperation with Global Transaction Banking. Deepening relationships with its most profitable clients remained a high priority in Corporate Finance, while also ensuring sustainable returns from its lending portfolio. The business maintained its leading position in Europe, continued to increase its market share in the U.S. and retained its strong franchise in Asia (source: Dealogic)
In recognition of its underlying franchise strength, Deutsche Bank won numerous awards in 2014, including Best Global Risk Advisor and Best Global Debt House from Euromoney and the Most Innovative Investment Bank for FX from The Banker.
Markets: solid revenue momentum
Markets: maintaining the leadership position in global fixed income
The client-focused business model of the Markets division produced growth and revenue share momentum in 2014. For the fifth time in a row, Greenwich Associates awarded Deutsche Bank’s Global Fixed Income business first place based on market share. In 2014, Deutsche Bank continued to benefit from the strong franchise of its businesses, with revenues broadly unchanged in an environment of generally declining revenues. While conditions were particularly difficult for the Foreign Exchange and Rates businesses, this was offset by strong performance in Credit Solutions. Regionally, Debt Sales & Trading had a strong performance in the U. S., offsetting more challenging conditions in the Europe, Middle East and Africa region (EMEA) as well as in Asia Pacific (APAC).
Through ongoing investments, the Debt Sales & Trading business successfully responded to the changing market. The business developed new analytical tools to identify where resources can add most value. This included a new sales platform providing more transparent, targeted and speedy information about client, business and sales performance. As part of the strategic focus on better serving multinational corporations, Markets also invested in a new electronic trading platform specifically for multinational corporate clients. The business adapted to market areas where regulatory change advanced. For example, it was the number one dealer in U. S. dollar interest rate swaps. This was the first major contract type to switch to compulsory centralized clearing and electronic trading, as demanded by regulators.
Deutsche Bank’s Equity Sales & Trading business had a strong year, capturing market share and achieving solid revenue momentum. The business recorded substantial improvements in income before income taxes. Greenwich Associates ranked Deutsche Bank number one in Flow Equity Derivatives and Equity Options for European Investors. In Cash Equities, the business continued to focus on enhancing its electronic capabilities. In Equity Derivatives, the bank focused on building out its capabilities with corporate clients and achieved a solid performance across regions, notably the U. S. Prime Finance reorganized its client offering and redeployed resources to better serve clients.
Markets: strengthening the leadership position in equity derivatives
Corporate Finance: record market share
Corporate Finance: market share gains in the United States
The Corporate Finance business was ranked number five globally in 2014 and achieved a record 5.4 % market share. It made gains across most products and regions, notably in global Leveraged Debt Capital Markets, M&A, in the United States and Europe (source: Dealogic). Corporate Finance won several top accolades awarded by IFR Magazine, including Euro Bond House and EMEA Financial Bond House of the Year.
In Debt Capital Markets, Deutsche Bank became the number one arranger of international bonds, including eight of the ten largest investment grade U. S. corporate bonds of the year and the largest high yield financing on record (Altice / Numericable). In Equity Capital Markets, Deutsche Bank is now the only firm to have been involved in all five of the largest ever initial public offerings. Deutsche Bank’s M&A business gained more market share than any other leading bank and ranked top three in EMEA. It also improved its rank and market share in the Americas and Asia Pacific excluding Japan (source: Dealogic).
Further resource reduction
CB&S’ results were robust despite intensive resource rationalization, reflecting the sustainability of the division’s client franchise. In response to the increased regulatory focus on leverage, CB&S continued to reduce its leverage exposure. However, the Basel 3 fully loaded risk-weighted assets (RWA) increased by 20 % to €176 billion as of year-end 2014. Changes in RWA were driven by model adjustments and higher operational risk resulting from increased litigation charges across the industry. The division continued to make solid progress with its Operational Excellence (OpEx) cost saving initiatives by achieving € 1.0 billion in program-to-date savings, which is ahead of target.
Driving cultural change
In 2014, CB&S took crucial steps to ensure the bank’s culture is better aligned to society’s expectations and clients’ interests. Today, CB&S sales people and traders are increasingly assessing the products they offer through multiple lenses, including non-financial risk and alignment to client needs. The objective is to ensure that CB&S runs a client-centric business focused on long-term value creation. Adjusting the mindset has required strong leadership from the division’s senior management. Over the course of 2014, substantial time and effort of the CB&S Executive Committee was invested in embedding Deutsche Bank’s values and beliefs deeper into the organization. Nearly all CB&S employees attended cultural change workshops facilitated by the senior leadership team. At the same time, CB&S rigorously enhanced its systems and controls to monitor compliance with the bank’s policies. Moreover, the CB&S control and conduct organization was strengthened as an independent control unit within the business.
2015 will be an important year for CB&S, as the division continues to reshape the business in response to the changing landscape in order to deliver a more efficient platform capable of generating sustainable returns for shareholders. Macroeconomic trends and diverging central bank policies are expected to create more favorable conditions for top line growth than in 2014, while ongoing cost discipline and execution of the Operational Excellence program will drive profits on the bottom line. CB&S made solid progress on its capital position in 2014 and will continue to consolidate and increase the efficiency of its business by optimizing its client portfolio, investing in technology and dynamically deploying resources to generate higher returns.
Most Innovative Investment Bank for FX
Most Innovative Investment Bank for Bonds
Most Innovative Investment Bank for Emerging Markets
Best Global Risk Advisor
Best Global Debt House
Best Investment Bank in Western Europe
Best Bank in Germany
Bank Risk Manager of the Year
No. 1 in Global Fixed Income
No. 1 in Flow Equity Derivatives
International Financial Review
Structured Finance House of the Year
Euro Bond House of the Year
EMEA Loan House of the Year