Deutsche Bank wrong-way $60 million inflation bet hurts trading
London: Deutsche Bank AG, struggling with US competitors, legal and technology costs and clients pulling back, had a further problem in the second quarter: its own traders.
Revenue from fixed-income trading, the Frankfurt-based lender’s biggest business, fell 12% to €1.1 billion ($1.3 billion) in the three months through June, more than double the decline predicted by analysts at HSBC Holdings Plc. The slump was impacted by a wrong-way bet traders made on US inflation that could cost Deutsche Bank as much as $60 million, according to a person familiar with the matter.
The loss, which compounded a revenue drop across Deutsche Bank’s trading businesses, shows the impact that one soured wager can have, even on one of the world’s biggest investment banks. The wager on US inflation, which Bloomberg reported last month, triggered an internal probe into whether traders breached risk limits. Jacob Bourne, who described himself on LinkedIn as Deutsche Bank’s “head of US inflation,” has since left the lender.
“Rates revenues were lower driven by a difficult quarter for market making in our US rates business,” Deutsche Bank said in a presentation, referring to the unit that houses the inflation-trading desk.
Revenue at Deutsche Bank’s fixed-income business fell by €158 million from the same period a year earlier. Clients pulled back from trading products tied to foreign exchange and interest rates across Asia Pacific while sales also slid in emerging markets, the lender said in a presentation. Bloomberg