NEW YORK, April 4 (LPC) - Deutsche Bank was the biggest mover among the league tables for investment banks underwriting leveraged loans during the first quarter of the year, according to data from LPC, a unit of Refinitiv, despite turbulence in the debt and equity markets that slowed lending in December and into January.
The German bank jumped to fourth place among investment banks for overall leveraged underwriting during the first quarter of 2019, taking a 4.6% share of the market. The bank came in eighth place overall for 2018 with a 4.5% market share.
“Leveraged finance has long been a strength of Deutsche Bank’s. We have stayed active in the market throughout turbulent times and remain committed today,” said Sandeep Desai, co-head of leveraged debt capital markets at Deutsche Bank.
The leap comes as Deutsche Bank and Commerzbank have begun discussions over combining the two largest banks in Germany, as reported by Reuters. Deutsche Bank’s stock price has fallen from almost US$30 per share in 2015 to US$7.65 per share on Wednesday amid litigation and regulatory woes, as reported by Reuters.
The bank’s leveraged finance business distanced itself from those concerns moving above Citigroup, Goldman Sachs, Credit Suisse and Barclays in claiming the fourth spot.
Bank of America Merrill Lynch came in first with a 13.1% market share, JP Morgan came in second with 9.8% and Wells Fargo was third with 9%. The top three banks during the first quarter were also the top three banks during the full year of 2018 in the same places.
Leveraged loan volume hit a three-year low at US$152bn during the first quarter as volatility in both the equity and credit markets at the end of 2018 slowed business amid fears of a global economic slowdown.
Secondary loan prices sank to 94.57 on LPC’s index of heavily traded loans, marking a multi-year low on December 28, 2018. This level has since risen to 97.5 as of Wednesday. The recovery allowed banks committed to underwriting during the volatility to capture additional market share.
In 2017, Deutsche Bank’s CFO James von Moltke said the bank had decided to cut its leveraged finance activity due to its credit risk appetite. The CFO in February said the firm’s portfolio had performed well during 2018 and saw no provision for credit losses in the fourth quarter during the height of volatility.
Leveraged finance currently makes up just 1% of the bank’s loan portfolio, according to comments from von Moltke at a conference call discussing the bank’s 2018 financial results, which showcases Deutsche’s sheer size.
“Ultimately the business is an originate and distribute business, and so for us we focus on the underwriting quality of the origination in the business, but then on how it’s risk managed in terms of managing de-risking trajectories, which we’ve done frankly very well on,” von Moltke said during the bank’s February conference call.
New money issuance was also noteworthy during the quarter as volume overall in leveraged finance was down across the board. The lower secondary prices caused repricing activity to vanish and reserved refinancing opportunities to the most qualified issuers.
Bank of America led this sector in addition to the overall standings, followed by JP Morgan, Wells Fargo, Credit Suisse and Barclays. This group of five also led new money deals for the entire year in 2018. Deutsche Bank was just 1bp behind Barclays though with 5.13% market share for new money versus 5.14%. (Reporting by Jonathan Schwarzberg. Editing buy Michelle Sierra and Jon Methven)