Deutsche Bank AG, the German lender losing market share across the world to its biggest rivals, has held on to a key group of clients: junk-bond billionaires.
The Frankfurt-based lender has sold 9.3 billion euros ($9.9 billion) of high-risk, high-yield bonds in western Europe since the start of 2016 for clients including billionaires Carl Icahn, Manuel Lao Hernandez, Mohammed Al Amoudi, Paul Coulson and Patrick Drahi, data compiled by Bloomberg show. The deals helped Deutsche Bank top the table for such bond sales on the continent even as it lost ground in other markets it used to dominate and its slice of trading revenue fell to the lowest since the credit crisis.
Deutsche Bank has dumped some less-profitable customers, while other clients stepped back from dealing with it amid questions about its capital levels and legal bills. Even as European high-yield issuance shrank last year, the deals show it’s an area where the firm is still willing to take risk as Chief Executive Officer John Cryan overhauls the bank.
“Deutsche Bank has had to make some decisions and they’ve chosen high-yield as a go-to product,” said Tim Hall, global head of debt capital markets at Credit Agricole SA until last year. “What you love about those clients is they’re acquisitive, they’re on the move and they have a high velocity of transactions. Banks love that.”
Icahn Deal
Icahn, 81, chose Deutsche Bank as the sole manager for Federal-Mogul Holdings LLC’s sales of 715 million euros of bonds late last month, the data show. The Southfield, Michigan-based maker of automotive parts, which generates almost half its sales in Europe, is part of the U.S. mogul’s $20 billion sprawling business empire.
The deals for Icahn, who’s also serving as an adviser to U.S. President Donald Trump, helped Deutsche Bank leapfrog Goldman Sachs Group Inc. to top the western Europe high-yield league table in the first quarter. The firm has managed 24 high yield bond deals in the region this year and sold about 2.3 billion euros of the debts for clients, compared with 1.7 billion euros for its New York-based rival.
Junk bonds are debts that ratings firms judge more likely to default. In the U.S., banks charge high-yield issuers about 1.2 percent of the amount borrowed to compensate them for the risk that the debt’s value could drop before the firm is able to sell it on to investors, data compiled by Bloomberg show. That compared with about 0.5 percent for investment-grade corporate debt.
Alison Moody, a spokeswoman for Deutsche Bank in London, declined to comment on the business. Federal-Mogul’s Jim Zabriskie declined to comment on its hiring of the bank.
Slipping Elsewhere