Deutsche Bank axed its derivatives and equities trading arms as part of massive job cuts but left its research function relatively untouched, and a memo leaked by one of the bank’s hedge fund clients gives details on which jobs were spared.
Deutsche will not touch its fixed-income research team, while its US and European Union research units will have slight cuts to their sales teams, the memo says.
Deutsche Bank’s decision to keep its research unit largely intact shocked insiders, sources say, since it has not historically had a strong reputation in that area. European regulations have also upended the research industry.
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Deutsche Bank surprised insiders by sparing big parts of its research division as it laid off tens of thousands of other workers and dumped equities and derivatives trading entirely. A leaked memo from one of the bank’s hedge fund clients seen by Business Insider reveals the bank plans to hold on to huge swathes of the division.
“Deutche Bank management is focused on businesses with low risk and [that are] operationally stable — research being one of those businesses,” the memo said.
In Europe, 95% of the research team will remain, the sales team will be cut slightly “and their scope has been narrowed to only sell/push research,” the memo said. For US research staff, 85% to 90% will stay on with a smaller sales team. The entire Asia research business will shutter.
Deutsche Bank had said it would keep an equity and macro research capacity and a targeted equity sales force, but has not publicly detailed how much of the teams would be spared.
Insiders at the bank said they were shocked by the decision to focus on research. The move is especially notable given regulations in Europe that have split the industry between elite players and boutique firms.
“We will continue to provide the high quality independent Macro, Thematic, and Fixed Income Research for which DB is a known industry leader,” a Deutsche Bank spokesman said in an email to Business Insider. “Quantitative Investment Solutions will also continue as will our primary research and data science work within dbDIG.”
The Bank is also committed to providing extensive and top-quality Company Research coverage for key sectors in Europe and the US,” the spokesman said.
Read more: Here’s why Deutsche Bank’s thousands of newly unemployed workers have a tough road ahead
Exiting equity trading wasn’t a huge surprise, since trading fees have been hammered by banks jostling for market share, and the biggest banks have been pricing out mid-size rivals. But the decision to keep research shocked insiders, a source told Business Insider.
Deutsche Bank isn’t known for its strong research, (at least if you ask rival bank employees or consult various annual rankings lists.) And keeping equity capital markets, or ECM, research was especially surprising, insiders and a banker at a rival firm said, since the bank gutted its ECM trading arm.
David Folkerts-Landau, chief economist and global head of research, …read more
Source:: Businessinsider – Finance