Barclays crosses while the Deutsche Bank tour
Barclays crosses while the Deutsche Bank tour
Have a simple connection: the amount of cheap funds you can offer to investment banking clients.
The lesson for investors of the results of the third quarter of Wednesday is not so simple. For Barclays, the pace of improvement is likely to slow down next year. He has loosened the reins in his balance, a trick that will cost him to repeat.
At Deutsche, the high cost of financing is a problem that is largely beyond the reach of the German bank. A lot of this boils down to investor and confident clientmy. That's not a good place to be and Wednesday's results did not help: another drop in the group's revenue caused Deutsche's share price to drop more than 4% in the initial operations. Barclays rose more than 3%.
For both, the income from stock trading illustrates the deeper story. Volatile markets have done actions a bright spot this year: the combined revenues of US banks grew 18% in the first nine months compared to the same period last year. Barclays beat its US rivals with a 36% increase in revenues in dollar terms, while revenues from Deutsche Bank shares fell more than 10%.
For Barclays, the pace of improvement is likely to slow down next year.
Photo:
Stefan Wermuth / Reuters
Part of this is where they do business: Barclays is big in the US. UU., Deutsche is biased towards a tarnished Europe. But their respective abilities to attract clients with cheap funds is also an important factor, particularly with hedge funds, often the most active and profitable clients.
Barclays said that the growth was strong in the main finances, since this area is known, with customer balances 11% more than last year. Barclays expects to continue growing in this area because attracting customers with financing is the first step, after which it expects them to use the bank for a growing part of their commercial activity.
However, this year was the big change for Barclays, as new people have joined and more balance has been added. Those resources will not continue to grow and it is highly unlikely that next year's revenue increase will outperform its rivals in the United States in something similar.
Deutsche said that revenues from primary finance were significantly lower, affected by higher financing costs. Deutsche says it has recovered lost customers at the end of 2016. The problem is that they are not doing as much with the bank as Deutsche expected, and that's partly because it's more expensive to deal with than rivals.
From here, Barclays should begin to level off at its cruising altitude, but Deutsche is still struggling to get out of its tail spin.
Write to Paul J. Davies in paul.davies@wsj.com
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