Deutsche Bank’s position at the helm of the European junk-bond table contrasts with its rankings in other markets. In 2013, the lender was the biggest arranger of overall European bond sales, the second-biggest in emerging markets and the fourth-biggest in U.S. high-yield. By last year, the firm had tumbled out of the top five in each of these asset classes. The lender’s overall fees from debt underwriting fell 6 percent to $1.5 billion in 2016, while many rivals posted increases, according to Bloomberg Intelligence data.
Deutsche Bank has shown signs of rebounding in some areas this year, as it climbed back to the top spot for arranging leveraged loans across Europe, the Middle East and Africa in the first quarter, after tumbling to ninth last year, the data show.
Declining revenue at the bank prompted analysts and investors to fret over how Cryan will boost profitability and, last month, he unveiled his second overhaul plan since taking charge in mid-2015. Along with raising about 8 billion euros in fresh capital from investors in a sale that wraps up Thursday, Deutsche Bank will also focus more on doing deals for corporate clients instead of hedge funds and asset managers.
‘Money Spinner’
Deutsche Bank’s London-based high-yield unit, overseen by Henrik Johnsson, cultivates the continent’s moguls because they tend to be repeat bond issuers and often look to their lender for merger advice and help arranging other forms of finance, including loans and initial public offerings, industry veterans said.
“Deutsche Bank needs to keep this clock wound and well-oiled,” said James Ward, former head of European high-yield at Axa Investment Managers in Paris. “It’s a long-term money spinner.”
Still, arranging junk bond sales isn’t the cash cow it used to be. Sales of the debts in Europe are forecast to fall almost 10 percent this year to 50 billion euros after already declining about 20 percent last year, according to Societe Generale SA.
Investors have piled into riskier debt in Europe in pursuit of higher returns as the European Central Bank buys up billions of euros of higher-rated bonds to boost the economy. As the ECB starts to reduce the purchases this year, there’s a higher chance investors will sell high-yield holdings and companies will delay plans to come to market and sell more, said David Watts, a credit analyst at CreditSights Inc. in London.
“Deutsche Bank is making good revenues off a market that at the moment is OK, but the peak of issuance was years ago,” said Watts. “If the high-yield market turns, that will affect banks who are generating fees.”
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