Posted by on August 24, 2017 6:45 am
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Categories: Barclays Business Deutsche Bank Economy European Union Finance Financial crises fixed Global Systemically Important Banks Investment banking Investment banks money Securities research Subprime mortgage crisis Systemic risk Technology UBS

One by one over the past several months, Europe’s largest investment banks have each rolled out their new pricing models detailing how they’ll charge for research in 2018 once the new MiFID II regulations go into effect.  Pricing strategies have varied from expensive all-in packages costing nearly $500,000 a year to pay-as-you-go plans that charge for each research report individually.  Here are a couple of recent examples:

That said, ever since the first pricing plans hit the market we’ve maintained that the finance world’s masters of corporate valuation might ultimately find themselves shocked by the bid/ask spread between what they think their daily pearls of financial wisdom are worth versus the value that asset managers are willing to ascribe to those services.  Here’s how we summed it up in one of our first posts on the topic:

Literally no one knows the true ‘value’ of research, not even the investment banks that are selling it.  Up until now, equity research has been treated as a ‘freebie’ given away to institutional clients in return for trading commissions but that is all about to change thanks to the European Union’s MiFID II regulations, which require asset managers to separate trading commissions from investment-research payments.

Unfortunately, at least for the Investment Banks of the world, while the cost of generating equity research may be substantial, it turns out that the true ‘value’, as defined by institutional clients’ maximum willingness to pay for reports, may be much less.  Which is shocking given the creativity required to constantly generate new variations of daily reports politely suggesting that you “Buy The Fucking Dip.”

But, as banks try to figure out their ‘value add’, the bid ask spread ranges from about $50,000 for a basic, annual fixed income package up to $600,000.  In other words, at least 1 investment bank thinks their research is worth roughly 6 full-time, dedicated junior analysts.

Of course, as we said before, almost any amount of money seems, at least to us, to be too much to have the same people give you the same advice over and over again, namely “buy more stocks, faster.”  There, we just summarized 90% of all equity research that will ever be written for the rest of history in 4 simple words and completely free of charge.  You’re welcome.


Now, it turns out that Deutsche has become the first investment bank forced to admit what we’ve known for some time now, namely that the commoditized product they sell into a hyper-competitive, saturated market might not be as valuable as they once thought.  And, to our complete ‘shock’, they’ve been forced to slash their research prices in half as a result.  Per Bloomberg:

Deutsche Bank AG has halved the price of its fixed-income and macro research as competition mounts in the run-up to Europe’s MiFID II regulations, three people with knowledge of its plans said.

The German lender proposes to charge asset managers 30,000 euros ($35,000) a year for up to 10 users, said the people, who asked not to be identified because the information is private. This was cut from the 60,000 euros it had initially planned after other banks revised their prices lower, according to a memo sent to clients. A spokesman for Deutsche Bank declined to comment.

So, what do you get as part of this new 50% off deal?  How about free web access to reports (which is great because the carrier pigeons have been really slow lately) and the ability to actually speak with analysts…is that something that might interest you?

Deutsche Bank’s 30,000-euro package includes web access to written research and contact with analysts, the people said. Deliberations are ongoing and the bank hasn’t made a final decision on the pricing.

The Frankfurt-based lender’s prices are linked to the number of users. Web-only access for up to five people is quoted at 15,000 euros per year, while a package including web access and contact with analysts is 50,000 euros for up to 25 users, one of the people with knowledge of the matter said.

Why do we have a sneaking suspicion that DB isn’t going to be the only bank forced to slash their research prices?

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