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Deutsche Bank's big hiring in a bad quarter now on display

Deutsche Bank’s first quarter results for 2023 are out and it was… A mixed bag.

The investment bank didn’t do very well. Revenue fell to €2.7bn from €3.3bn in the first quarter last year, but the investment bank's increased headcount massively – from 17,071 to 19,118 in a single quarter.

It paid slightly more in compensation than last year – €612m vs €611m – but that pot was spread across the extra 2,000 people. The numbers suggest that the average Deutsche Banker in q1 was paid nearly €4k less than the same quarter last year (from €35.8k per head to €32k per head, an 11% decrease).

DB itself said that it is “also focused on right-sizing our non-client facing functions,” and that in the second quarter it intended to reduce “senior non-client facing workforce by 5%,” as well as introduce some degree of freeze on new hiring.

Bloomberg noted that the Deutsche’s trading team is probably safe from the axe, even though it had been adding former Credit Suisse seniors at a rate of knots.

Although Fixed Income & Currencies (FIC) trading fell by less than other investment banking segments, it still trailed far behind Wall Street peers, whilst M&A and capital markets revenue was on par.

FIC trading still made up the overwhelming majority of Deutsche’s IB revenue (some 88% in Q1 2023, up from 85% in Q1 2022), so a decline in volatility (which, admittedly, is usually good for the world at large) has an outsize impact on the investment bank’s bottom line.

The FIC revenue decline could be a case of poor motivation – after a pretty successful 2022, Deutsche Bank revealed a pretty stagnant bonus pool. The bank itself pointed the finger at “a significant contribution from episodic items in the prior year quarter which did not recur.”

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AUTHORZeno Toulon

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