Deutsche (DB) to Control Costs by Revamping Fixed Income Sales

In order to recede costs without forgoing revenues from its biggest source of income, Deutsche Bank AG DB is planning to restructure its fixed income trading products. The news was reported by Bloomberg.

The new model will break the coverage team into two groups, where one will be concentrating on flow and liquidity while the other will focus on client solutions. The move will be in an endeavor to garner purely electronic or voice offerings to one set of clients and a more state-of-the-art or tailor-made, and thus expensive service to another set of clients.

The bank will steer the new structure among its team for European rates and credit flow products in an attempt to “dynamically manage the firm’s client perimeter.” As a result of this overhaul, nearly 80 staff members are likely to face the impact. Although the project aims at trimming the cost of trading, the firm does not currently intend on job cuts as a result of it.

The fixed income trading unit led by Ram Nayak is facing the squeeze to contribute to Deutsche Bank’s cost-cutting endeavors. Most of the future savings are expected to materialize from lower back-office costs by decommissioning IT and restituting manual work with machines after a vigorous personnel reduction through the past two years.

Deutsche Bank’s investment bank, whose currency and fixed income trading play the biggest part by far, has assured to keep revenues stable this year while abating costs by approximately 10% by the end of 2022. The new model will also probably be rolled out later to other parts of the bank in case it proves lucrative.

Deutsche Bank's efforts in reducing expenses have borne fruits. Adjusted costs have been declining over the last five years, with the trend continuing in the first quarter of 2021. Further, Deutsche Bank targets to reduce adjusted costs to €16.7 billion by 2022-end. The new model for cost control and its several strategic initiatives are expected to support Deutsche Bank's financials and stronghold.

Shares of Deutsche Bank have gained 28.2% over the past six months, outperforming 23.3% growth recorded by the industry.

Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

BNP Paribas SA BNPQY has witnessed 11.7% upward estimate revision over the past 30 days. Also, the company’s shares have risen nearly 41% in the past six months. It has a Zacks Rank #2 (Buy) at present.

Barclays PLC’s BCS estimates have been revised 15.5% upward for current-year earnings over the past 30 days. Also, the company’s shares have risen 39.7% in the past six months. It carries a Zacks Rank #2.

The Zacks Consensus Estimate for UBS Group AG UBS current-year earnings have been revised 12% upward over the past 30 days. Also, the company’s shares have risen nearly 4.9% in the past six months. It currently carries a Zacks Rank of 2.

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