Deutsche Bank's 300 new Numis bankers, and a loss in the investment bank
If the three months to December 2023 were a bad quarter, no one told Deutsche Bank. While even JPMorgan was quietly trimming headcount as the year faded, Deutsche Bank was still out there accumulating talent.
Today's fourth quarter results from Deutsche Bank show it adding nearly 300 front office staff in the investment bank in the fourth quarter. In the same quarter, the investment bank made a loss of €200m following a €233m impairment relating to its acquisition of Numis.
This contributed to a 43% year-on-year decline in profit at the unit and to an annualized post tax return on shareholders' equity for the investment bank of just 3.8%. Most of the new hires are from Numis, but Deutsche Bank possibly couldn't afford to be hiring bankers and traders into year-end.
Deutsche Bank is going for growth. Deutsche Speaking today, CEO Christian Sewing says he expects "normalization in 2024, followed by further growth in 2025," and CFO James Von Moltke announced an increase in the bank's overall growth target to, "5.5-6.5% over the 2021 to 2025 period, supported by investments across all business areas and a more favorable economic and market backdrop
Across 2023 as a whole, Deutsche added 606 front office staff in its investment bank. Those additional bankers and traders need to start bringing in revenues. In the fourth quarter, Deutsche's fixed income trading revenues were up 1% year-on-year to an all-time high driven by "significantly higher" credit trading and Asian emerging markets revenues, while FX and rates revenues were off their peak. Debt origination revenues were up a massive 142% y-o-y, which advisory revenues were down 5%, which was unfortunate given that DB is also known to have hired more than 40 senior investment bankers across the year as a whole.
What next? Growth, hopefully. In the meantime, Deutsche Bank is cutting costs, just not in the front office of the investment bank. The bank is in the process of taking €2.5bn of "efficiency measures", including a €400m "operational efficiency program."
Sewing said today that the focus for cost-cutting is operations, technology and infrastructure. The bank plans to make €700m in savings from things like application decommissioning and model improvements, €300m from simplified workflows and automation, and plans to reduce 3,500 roles across the bank in non-client facing areas.
Accordingly, while DB was still hiring bankers and traders in the fourth quarter, it was cutting staff elsewhere: nearly 600 operations staff in the investment bank disappeared. Controls staff appear to be protected, however: Sewing said around 1,000 of them were added across the bank last year.
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