Deutsche Bank last in JPMorgan’s 1Q pecking order


FRANKFURT • Deutsche Bank AG was ranked last among major European and US investment banks in the first quarter (1Q), according to JPMorgan Chase & Co.

Analysts led by Kian Abouhossein cut the German lender’s 1Q adjusted earnings per share estimate by 7%, the most among the eight banks in its so-called pecking order, “mainly on lower trading revenue”, according to a note to investors. “We prefer investment banks with ability to show cost flexibility in a challenging environment,” they said.

January was a terrible month for trading at Deutsche Bank, though February was better, according to people familiar with the matter. The German lender said in its annual report in March that conditions in the business continued to be challenging; UBS Group AG CEO Sergio Ermotti last month described the 1Q as one of the toughest in years and France’s Societe Generale SA announced job cuts after the slump.

“While management delivers on variables it can control, ie costs, capital and balance sheet/liquidity, the revenue environment remains challenging,” the analysts wrote. “The big question is on corporate and investment banking revenues, where it is not clear the franchise is turning around yet.”

The average reduction in the group was 3% and UBS Group was the only one left unchanged, having been after Ermotti’s comments on the tough 1Q last month.

Deutsche Bank’s revenue from trading securities contracted for seven consecutive quarters and is a focus in the lender’s talks with rival Commerzbank AG about a potential merger.

One of the reasons Deutsche Bank is looking for a deal is to move the lender away from its large exposure to the volatile trading business, people familiar with the matter have said.

The current consensus estimate for Deutsche Bank’s 1Q compiled by JPMorgan sees a drop in trading revenue of 18.6%. The bank is scheduled to report results on April 26. — Bloomberg