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Deutsche Bank's big hiring has borne fruit, but it still has €1bn of costs to cut

If you're a bank wondering whether hiring new talent is a good move in a difficult market, Deutsche Bank's first quarter results today should lay your fears to rest. After some voracious hiring, first quarter results in the investment bank were pretty fine.

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As the chart below shows, Deutsche's fixed income traders, M&A bankers, equity capital markets bankers and debt capital markets all had a strong quarter. Profits in the investment bank rose by 44% over the period. 

Deutsche Bank itself implied that its higher revenues were the result of its new arrivals. In prepared comments, CEO Christian Sewing said "investments in talent" boosted origination and advisory revenues, while "investments in 2023" helped drive revenues in credit trading. 

Last year, DB added around 350 people in the UK when it acquired Numis. It also hired around 50 managing directors in its investment banking business globally under an expansion plan initiated by Fabrizio Campelli, head of its investment bank. In 2022 and early 2023, it inserted various senior people from Credit Suisse's credit trading business, allegedly on large guaranteed bonuses. 

It's only April and Deutsche Bank people have only just been told their bonuses for 2023, but things are looking auspicious for bonuses in 2024. "Higher performance-related compensation," was accrued in the first quarter. Spending on pay rose 12% year-on-year. 

And yet Deutsche Bank hasn't finished cutting. The bank said today that it's extracted €1.5bn of the €2.5bn costs it intends to cut by the end of this year. It's still in the process of what it describes as, "additional front-to-back improvements of product processes, and harmonization of infrastructure capabilities." Costs are coming out of the middle and back office. 

After last year's big hiring, recruitment this year at Deutsche Bank is likely to be quieter. Headcount in the investment bank was flat in the first quarter versus the end of last year, and front office headcount specifically declined slightly. 

Nonetheless, as we reported yesterday, Deutsche has been making strategic additions to its US fixed income trading business. It might also need some new rates trading talent: rates sales and trading revenues were "significantly lower " in Q1. The bank attributed this to "a reduction in market volatility," but it might also have something to do with all the rates traders who've left for rivals like Nomura.  

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AUTHORSarah Butcher Global Editor

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