Slump in debt trading sends shockwaves across City firms

Courtesy of City AM:

BANK shares fell yesterday as fears mounted that global bond trading is facing a prolonged decline, after Deutsche Bank swung to a surprise loss in the final quarter of 2013.

The German lender joined Goldman Sachs and Citigroup, who last week reported weak fixed income trading revenues.

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Deutsche Bank’s shares dived another 5.4 per cent, and sent shockwaves through markets – other firms heavily involved in fixed income also saw their stock fall.

Icap’s shares dived 4.31 per cent, while fellow broker Tullett Prebon’s edged down 0.85 per cent.

Barclays saw its shares dip 2.01 per cent and RBS fell 1.29 per cent – it still has bond market exposures despite slimming its investment arm.

Problems in fixed income helped drag revenues in Deutsche’s corporate banking and securities arm down 27 per cent in the fourth quarter, a key driver behind its €1.15bn (£941m) loss in the period.

The bank’s co-chief executive Anshu Jain told investors the unit will continue to struggle.

“We are conscious we’re more exposed to fixed income than many of our peers and more exposed to Europe,” he said. “This will be a challenge going forward given near-term trends which favour the US and equities as an asset class.”

Bonds had been seen as safer than shares through the crisis, but as growth returns investors are looking back to the stock markets, hitting bond prices.

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