The bulk of what we’ve heard about Deutsche Bank’s massive layoffs plans – either directly from bank or through back channels – is that they’re focused on the bank’s equities business, with the elimination of 25% of all jobs within the unit. Deutsche Bank’s U.S. equities sales and trading business was said to be taking the brunt of the punishment.
Yet roughly 10 weeks out from the first round of cuts (around 400 U.S. staffers were already let go by the third week of April) Deutsche Bank’s U.S. equity capital management (ECM) team seems to have weathered the secondary market storm quite well considering. Deutsche Bank finished 11th in the U.S.. ECM league tables during the first half of the year, pulling in over $101 million in net revenue, according to Dealogic. While that’s down from 9th in all of 2017, Deutsche Bank’s U.S. ECM business is actually on pace to slightly trump last year’s performance, when it booked $195 million in revenue with a full team. And it only trails the 9th place position by 5% as of the end of June.
The numbers give credence to the theory of some current U.S. Deutsche bankers that the firm was simply cutting unnecessary fat without hitting the bone. Deutsche’s ECM team was extremely efficient, generating more revenue-per-deal than any of its surrounding peers on the league tables. Deutsche Bank’s debt capital management (DCM) business survived in equal fashion, falling from 8th in 2017 to 10th in the first half of the year. Again, they were around 5% from equaling last year’s ranking.
So where has the real carnage taken place? We'd suggest looking at Deutsche Bank’s U.S. mergers and acquisitions group. Deutsche Bank has fallen from 13th to 18th in the league table rankings, and now trails the likes of San Francisco-based boutique Qatalyst Partners, which was involved in one-quarter of as many deals as Deutsche Bank, according to Dealogic. In U.S. M&A, DB currently sits behind eight boutique investment banks.
Deutsche Bank’s U.S. M&A unit brought in virtually the same revenue as its ECM team during the first half of this year – around $101 million. No other full-service investment bank came close to equally this feat in the U.S. (most far exceed it). And it’s not that Deutsche's M&A business is simply being outperformed by competitors in an up-market. They are on pace to miss last year’s revenue total by 28%.
The league tables suggest that a smaller headline may have had a much more material impact than the broader news surrounding the firm’s restructuring. As part of the moves, Deutsche Bank closed its Houston, TX office which primarily focused on advising oil and gas companies. The decision to walk away from oil and gas in the U.S. and the U.K. came as a bit of a shock to some insiders as it was said to be one of the better performing units within Deutsche Bank’s languishing global M&A business. Paranoia among other Deutsche M&A bankers ensued.
The closing of the Houston office and other oil and gas advisory cuts reportedly resulted in loss of around 70 jobs – mostly dealmakers and other front-office staff, according to the Wall Street Journal. The layoffs surely saved Deutsche Bank millions in overhead, though it appears they may have had more impact on earnings than other cuts within the U.S. investment bank, at least for now.
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