Deutsche Bank is exiting agency residential mortgage-backed securities trading as part of a larger strategic plan announced Thursday that cuts thousands of positions in numerous business lines worldwide.
The move is striking because the company has ranked recently among the top 10 underwriters of mortgage-backed debt by Thomson Reuters.
"That's quite a surprise. They're active in our markets," said Walter Schmidt, a senior vice president and manager for mortgage strategies at FTN Capital Markets.
But he said he expects the withdrawal will happen gradually and that other Wall Street players will be able to fill in the gap without disturbing the trading in the securitization market that many U.S. lenders sell their loans into.
"I'm sure whatever they would do, they would try not to be disruptive," said Schmidt.
Deutsche Bank in its strategic plan made cuts in many areas it considers outside its core competencies, less profitable, and constrained by regulation.
The company's New York media relations office had not returned a call for comment at deadline.