????Deutsche Bank’s greatest strength is its fixed income arm, especially, trading. In its best years, the bank was generating fantastic 40% ROEs in its bond business. Even in 2009, in the wake of the financial crisis, it enjoyed great success in trading. Investors were desperate to exit securities at any price, providing huge “spreads,” or margins, for the bank. At the same time, many of Deutsche Bank’s biggest competitors were reducing their bond trading or closing their fixed income desks altogether. So in 2009, Deutsche Bank profited handsomely by bucking the trend, and it maintained its signature franchise.

????Jain-Fitschen decided to rely on their bastion of profitability, bond trading. Their plan was twofold. First, they believed that the retrenchment of many big players, including UBS and Credit Suisse, would put their bank in a far more powerful position. The idea was that the reduced competition would both raise both their market share and trading margins. They also figured that the ultra-tight capital restrictions would gradually loosen, so that banks could once again expand their trading books without huge increases in reserves.

????Neither of those predictions worked out as planned.

????To make matters worse, the flush, pre-financial crisis time, reprised in 2009, didn’t return. For the past half-decade, fixed income markets have been relatively placid. New regulations have forced the banks to substantially shrink the size of their inventories of bonds for sale. Most customers are in no hurry to sell their bonds and buy new ones at today’s rates, so turnover is low. “They keep waiting for the trends they predicted to happen, and they haven’t happened,” says Becker.

????In announcing the changes at the top, the Deutsche Bank board stressed that it’s adhering to the investment banking-first strategy. The bank does have a substantial retail business, boasting around $220 billion in deposits at its branches. But it pledges to shrink that franchise by selling Postbank, which offers banking services in post offices throughout Germany and accounts for half of Deutsche Bank’s deposits.

????If it’s well run, retail banking has a strong future because deposits provide big pools of money that’s pretty much interest-free. As rates on loans and securities inevitably rise, those cheap deposits become highly profitable.

????The future isn’t nearly as predictable for bond trading. Electronic platforms are now matching big owners, the Fidelities and Vanguards, directly with one another, bypassing the banks and lowering costs in the process. We may be on the brink of a sister revolution to the one that modernized the equity markets and ominously squeezed most of the profit out of stock trading.

????It’s usually safe to bet that, after a crisis, businesses can return to a state of normalcy. But it’s not always so, especially not in the outdated, bank-dominated bond business. The world has changed. The question is whether it will change back. For Deutsche Bank, planning on a reprise of the good old days may be a losing wager.