Category Archives: Banks

(ZH) German Regulator Orders Deutsche Bank To Take Action To Prevent Money Laundering

(ZH) With Europe still reeling over the recent revelations of Danske Bank’s $234 Billion money-laundering scandal, another target emerged moments ago – and a far more prominent one – when Germany’s markets regulator ordered Deutsche Bank to “improve its controls to prevent money laundering and the financing of terrorism.”

The regulator BaFin instructed Deutsche Bank to “take appropriate internal safeguards and comply with general due diligence obligations” under German law, Bloomberg reported. Suggesting that there may be far more behind the scenes, BaFin also appointed a monitor to assess the bank’s efforts, the first time BaFin has taken such action against a bank in relation to money laundering, the authority said in a statement on Monday.

In August, Deutsche Bank acknowledged that its anti-money laundering processes remained inefficient more than a year after it was fined almost $700 million for helping wealthy Russians move money out of the country. Deutsche Bank has also been mentioned frequently in the context of providing president Trump with loans for his various business ventures when few other banks were willing to lend to the now-US president.

Following the news, Deutsche Bank shares – which recently were lifted by news the largest German lender was looking to convert into a holding company in order to make itself easier to sell – dropped by 1%, but quickly recovered.

“We are in agreement with the BaFin that we have to improve these processes in the corporate and investment bank further,” Deutsche Bank said in response. “The bank will work together with the BaFin and the special representative KPMG to fulfill the regulatory requirements as soon as possible and within the given time frame.”

(CNBC) Jamie Dimon says cyber warfare is the biggest risk to the financial system

(CNBC)

  • The “biggest vulnerability” for the financial system is the threat of cyberattacks, J.P. Morgan’s Jamie Dimon said on Thursday.

Biggest vulnerability today is cyber, JPMorgan CEO says

Biggest vulnerability today is cyber, JPMorgan CEO says  

Banks may be in sound condition post-Lehman Brothers, but the financial system could crack again if hit with a devastating cyber attack, J.P. Morgan Chief Executive Jamie Dimon warned on Thursday.

“I think the biggest vulnerability is cyber, just for about everybody” he told CNBC’s Indian affiliate CNBC TV-18 on Thursday. “I think we have to focus on it, the United States government has to focus on it.”

“We have to make sure because cyber — terrorist and cyber countries — they could cause real damage. We’re already spending a lot of money and J.P. Morgan is secure but we should really worry about that,” Dimon told CNBC-TV18’s Shereen Bhan in New Delhi.

Dimon put inflation running too hot as his second biggest concern, warning the reactionary raising of interest rates from the U.S. Federal Reserve could be the cause of a “traditional” recession.

Industry experts have placed increasing importance on the threat of cyber warfare as attacks become more sophisticated.

Jamie Dimon, chief executive officer of JPMorgan Chase & Co

Eric Piermont | AFP | Getty Images
Jamie Dimon, chief executive officer of JPMorgan Chase & Co

In the past, western officials have warned of increasing suspicious cyber activity originating from countries of concern including Russia, Iran and North Korea.

Earlier this year, America’s Department of Homeland Security and Federal Bureau of Investigation, alongside the U.K.’s National Cyber Security Center, released a joint technical alert warning of the threat of malicious digital activity being carried out by the Kremlin.

Meanwhile, authorities are worried about the heightened threat of cyberattacks from Iran on the U.S. and Europe, especially as the country becomes increasingly ostracized by the U.S., which has reintroduced sanctions on Tehran.

(BBG) A New CEO Plans Big Cuts to Mend Deutsche Bank

(BBG) Christian Sewing knows how to bring down expenses, but some say he lacks a grand vision.

As chief of Deutsche Bank AG’s retail division, Christian Sewing earned a reputation as an unapologetic cost-cutter who closed hundreds of branches, reduced staff by 7 percent—3,100 positions—over two years, and sold operations in Poland and Portugal. Today, as the company’s chief executive officer, he’s following a similar playbook. But there’s far more at stake as he faces restive shareholders dismayed by more than $10 billion in losses over the last three years.

Since April, when he was appointed CEO of the battered bank, Sewing has cut an additional 1,700 jobs, told bankers they can no longer buy first-class train tickets, eliminated daily office fruit bowls, and is planning to shrink the New York office 30 percent and move away from Wall Street. It’s part of a pledge Sewing made to trim overhead at least 8 percent by 2019. “We’ll have to make progress on costs,” he said at an August banking conference in Frankfurt. “It’s about what we can control ourselves: making the business profitable.

Sewing’s hardest task will be convincing investors and employees that he can break out of the bank’s cycle of serial disappointments. Revenue has fallen 21 percent in the last two years and is on track to drop again in 2018, to its lowest level in a decade. The investment bank is losing market share, the asset management division has been unable to stem outflows, and the stock has plunged to near-record lows since Sewing took over. The CEO has acknowledged that he has little more than a year to mend the bank’s shattered credibility. “If Sewing next year says they’ll continue to miss targets, that would be a big problem,” says Daniel Regli, an analyst with brokerage MainFirst.

There are persistent rumors that Deutsche Bank is considering a merger as a way out, most likely a tieupwith crosstown rival Commerzbank AG. But at a strategy conclave in Hamburg on Sept. 14-15, the supervisory board and top managers examined potential combinations with partners in Germany and abroad and decided the time isn’t right for such a deal. Sewing has told people around him that the company must first better integrate Postbank, the financial arm of the country’s postal service that Deutsche Bank bought in 2010 but never managed to bring under one roof with its own operations.

The new CEO contrasts sharply with his predecessors John Cryan and Anshu Jain, Brits who joined Deutsche Bank after rising to executive roles at rival investment banks. Sewing is a German who’s spent almost his entire career at the company, starting as a trainee at a branch in his hometown of Bielefeld and climbing the ladder in Frankfurt and abroad. He earned recognition from regulators for his work leading Deutsche Bank’s investigation into its role in allowing suspicious money transfers out of Russia—for which the bank was fined almost $700 million last year. In 2010 he joined senior management as chief credit officer, and he’s since served as deputy chief risk officer and audit boss.

Sewing commutes home most weekends to see his wife and four children near Bielefeld, a four-hour drive north of Frankfurt headquarters, and his deep roots in Germany have helped him cultivate strong ties with the country’s economic and political elite. He can be seen quaffing beers with bigwigs from Germany’s blue chip companies and has shared the stage with Finance Minister Olaf Scholz at industry conferences. “Sewing, a homegrown talent from the very beginning, represents the classic bank business in the European tradition,” says Michael Seufert, an analyst with NordLB.

Befitting the first German to run the bank as sole CEO in more than a decade, Sewing aims to shift away from Asia and the U.S., instead emphasizing Europe and especially Germany. The question is whether he has the charisma and vision to lead a sprawling operation with 100,000 employees spread across five continents. While his track record suggests that Sewing is good at increasing efficiency, his plan consists mainly of cutting expenses.

Deutsche Bank has gone through three other turnaround plans since 2015, and insiders fret that Sewing’s retrenchment will end up eliminating many global outposts. An investor who recently talked to Sewing said the CEO failed to adequately answer any questions that extended beyond his 2019 targets. And one top manager says Sewing rejected an argument that job cuts posed a risk to the unit’s effectiveness. “I don’t see Sewing as a visionary,” says Michael Hünseler, a fund manager at Assenagon Asset Management. “He’s a rational, adaptable CEO, but he doesn’t seem to like to make big bets.”

In April he ordered a review of the investment bank—meaning job cuts—which unsettled international clients and employees alike. Indeed, most of the positions eliminated in the second quarter were at the investment bank, and he’s dismantled teams doing equity research or strategic advisory work in Brazil, Dubai, and Japan. With many top staffers jumping ship, Sewing has sought to quash uncertainty by traveling the world—since becoming CEO he’s made five trips to the U.S. and three to Asia—to underscore the bank’s commitment to a global footprint. And he’s instituted get-togethers the company calls the “Hour of Truth,” where workers from all levels are encouraged to ask him questions.

His aim is to restore credibility and a sense of pride to an institution that’s become a symbol of failed expectations. Having witnessed the brutal defenestration of Cryan—whose tenure was marked by conflict with Supervisory Board Chairman Paul Achleitner and, ultimately, a failure to cut expenses—Sewing is trying to avoid what he’s called the bank’s “pattern of negative surprises” in fourth-quarter costs. “We’ve gone through a difficult phase,” Sewing said at the Frankfurt conference. “We need to reawaken our pride.” —With Nicholas Comfort

(EUobserver) Danish bank CEO resigns in Russia scandal

(EUobserver) Thomas Borgen, the Norwegian CEO of Danske Bank, Denmark’s biggest lender, resigned Wednesday over allegations it laundered billions of illicit Russian money. “I really regret it … I have lived up to legal obligations, [but] I think it is best for all parties that I stop,” he said in a stock exchange notice. The bank published the “unpleasant” results of its internal probe into the affair on Wednesday.

(Reuters) Deutsche to shift more assets to Frankfurt, ringfence UK operations after Brexit: source

(Reuters) Deutsche Bank (DBKGn.DE) is considering shifting large volumes of assets from London to Frankfurt after the UK’s planned exit from the European Union next year to meet demands from European regulators, a person close to the matter said on Sunday.

Deutsche will also transform its UK arm into a ringfenced subsidiary after Brexit and reduce the size and complexity of its British operations, the source said.

The Financial Times reported earlier on Sunday, citing people familiar with the thinking of the bank’s executives, that Deutsche could eventually move about three-quarters of its estimated 600 billion euros in capital back from London to its headquarters.

No final decision has been made on the size of the asset move, it added.

Deutsche Bank and the ECB declined to comment.

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According to the Financial Times, one option being considered is to shrink the size of the London balance sheet so it ends up smaller than its U.S. holding company, which has roughly $145 billion of assets.

Any large-scale transfer of assets would not happen overnight, but would take between three and five years or even longer, the paper reported, adding that setting up a ringfenced UK subsidiary would potentially cost Deutsche hundreds of millions of euros.

(Reuters) Exclusive: Deutsche Bank weighs overhaul that could make deals easier – sources

(Reuters) Deutsche Bank is considering an overhaul to loosen the bond between its retail and investment banks, according to three people with knowledge of the matter, a move that could make it easier to merge some or all of the group with rivals.

The German lender is examining creating a holding company structure, a step that would give it more flexibility to strike merger deals, as it seeks to regain its footing following years of heavy losses and multi-billion-dollar penalties.

The possibility is likely to be discussed at a meeting of management later this week in Hamburg, other people familiar with the matter said, as the bank’s new chief executive, Christian Sewing, sets a new course for the struggling lender.

“I gravitate to the holding structure,” said one of the people with direct knowledge of the debate.

Deutsche Bank declined to comment.

The structure, which would act as an umbrella over separate entities including its investment and retail banks, would see Deutsche following the example of U.S. rivals.

No decision, however, has yet been made, and while such an arrangement would bring potential advantages for the group, a number of questions about how it would work in practice, such as its tax impact, remain unanswered.

The debate to switch to the new structure comes at a time of upheaval for Deutsche.

Sewing was propelled to the helm earlier this year to reverse three consecutive years of losses and a falling share price. He has been on a mission to slim down the bank’s international operations and promote steadier income streams in its home market of Germany.

As Deutsche’s fortunes have declined, speculation of a possible merger has risen. Deutsche’s cross-town rival Commerzbank is mentioned as the most likely candidate.

The German government, which owns a 15 percent stake in Commerzbank, has recently voiced the need for a strong German banking industry to support companies in the nation’s export-led economy. That has stoked speculation it could engineer a merger.

Executives at both banks have privately talked down the chances of a merger anytime soon, saying the banks would need to overhaul their operations and restore profitability first.

While the holding structure could simplify potential mergers and acquisitions, giving flexibility in integrating a rival business, it has other benefits.

One of the people said it could shore up confidence in the investment bank by possibly making it cheaper to obtain finance if the holding company were to relieve it of some of the financial burden.

Regulators in the United States, UK and Switzerland also tend to favor the bank holding company structure, in part because it can help with the winding up of a troubled bank.

There has been a push since the financial crash to make banks easier to break up, lowering the risk that the problems of a troubled investment bank, for instance, could spill over onto ordinary savers.

About 90 percent of U.S. banks, including Citigroup and JPMorgan Chase, operate as holding companies, according to the U.S. Federal Reserve.

(Reuters) Deutsche Bank, Commerzbank increasingly open to merger: Spiegel

(Reuters) Executives of Deutsche Bank (DBKGn.DE) and Commerzbank (CBKG.DE) are increasingly open to the idea of a merger of Germany’s two largest banks, magazine Der Spiegel reported on Tuesday.

It cited one person as saying that Commerzbank Chief Executive Martin Zielke “would rather do it today than tomorrow”, but that new Deutsche Bank CEO Christian Sewing had said internally a merger was not on the agenda in the next 18 months.

It added that Finance Minister Olaf Scholz could also imagine a deal to combine the two lenders.

“We do not comment on banks’ strategic decisions,” a spokeswoman for the German Finance Ministry said. The German government still owns a 15 percent stake in Commerzbank after bailing it out during the financial crisis.

Deutsche Bank and Commerzbank both declined to comment.

The news sent shares in Commerzbank as much as 4 percent higher to a four-week high at 8.74 euros.

Shares in Deutsche Bank were 0.8 percent higher at 9.66 euros by 1418 GMT, outperforming a 0.5 percent slide by Germany’s blue-chip DAX index .GDAXI.

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Deutsche Bank, which has bought German peers Postbank and Sal. Oppenheim over the last decade, also held talks with Commerzbank over a potential merger in 2016.

At the time, the two lenders shelved the project as they wanted to complete their restructuring efforts before taking any steps in the direction of a merger.

(BBG) Deutsche Bank Top Investor HNA Is Said to Plan Exiting Stake

(BBG) Deutsche Bank AG’s top investor, China’s HNA Group Co., plans to exit its entire stake in Germany’s largest lender as it reverses a debt-fueled acquisition spree, according to people briefed on the matter.

The cash-strapped conglomerate, which most recently still held almost 8 percent of the voting rights, is selling the investment after China demanded that it focus on its airline business, said the people, asking not to be identified in discussing non-public information. It’s not clear how HNA would sell the stake, which it controls through a series of complex derivatives.

Officials for HNA and Deutsche Bank declined to comment. The Wall Street Journal reported earlier Friday that the Chinese government had told HNA to exit the stake, citing unidentified people familiar with the matter.

A disposal would add to pressure on Deutsche Bank, whose shares have slumped amid several unsuccessful turnaround efforts, and could act as a catalyst amid speculation that it may need to merge with another lender in the long run. For HNA, the sale would mark the unwinding of one of the most high-profile investments made during a multi-year acquisition spree that cost the company tens of billions of dollars.

Deutsche Bank shares fell 2.1 percent at 12:25 p.m. in Frankfurt trading, bringing losses this year to 40 percent.

Long-Term Hedge

HNA held as much as 9.9 percent in Deutsche Bank in 2017 through a combination of outright holdings and options, but it’s been reducing the investment and replacing actual shares with financial instruments. Most of the stake is now controlled through derivatives that limit HNA’s losses, meaning the disposal may not affect the share price as much.

HNA previously said it was committed to the stake, but the government instructed it to focus on its main business of travel and stop diversifying through acquisitions when China’s top leaders earlier this year agreed to help HNA raise funds, people familiar with the matter have said. This year alone, the company has sold more than $17 billion in assets, including its holdings in Hilton Worldwide Inc.

Read more: A QuickTake on HNA’s struggles

HNA plans to gradually exit its Deutsche Bank stake over the next 18 months, the Wall Street Journal said. The company is also in talks to sell Ingram Micro Inc. and Swissport International Ltd., the newspaper said, citing people familiar with the matter.

HNA is still burdened by one of the largest interest expenses in the world. In July, it was roiled by the sudden death of co-Chairman Wang Jian, a tragedy that threw a wrench at its normalization plans as Wang was said to be the mastermind behind the purchase of many of the assets that are now being sold.

At Deutsche Bank, HNA’s exit would leave a void that could attract other strategic buyers. Cerberus Capital, the U.S. buyout firm run by Stephen Feinberg, is already a top investor in Deutsche Bank and also holds a large stake in rival Commerzbank AG. That has prompted speculation in the past that it may seek to combine the two.

Deutsche Bank Chief Executive Officer Christian Sewing in April unveiled the bank’s fourth turnaround plan in three years. He aims to cut around 4,000 jobs this year in an effort to slash costs and focus on the bank’s European clients.

HNA has long been a controversial shareholder for the lender. Former CEO John Cryan initially refused to meet with its executives, people familiar said at the time. He eventually relented when the issue fueled tensions with Deutsche Bank Chairman Paul Achleitner, who was personally involved in wooing the investor.

(CNBC) Bitcoin falls after Goldman reportedly drops crypto trading plans

(CNBC)

  • Goldman Sachs is dropping its plan to open a trading desk for cryptocurrencies, Business Insider says, citing people familiar with the matter.
  • Bitcoin fell roughly 5 percent to below $7,000 following the report, and the rest of the top five cryptocurrencies by market cap were all down by more than 12 percent.
  • “To the extent that they represent the institutional herd, this is a negative,” Brian Kelly of BKCM says.
Goldman Sachs reportedly ditches plans to trade cryptocurrencies

Goldman Sachs reportedly ditches plans to trade cryptocurrencies  

Bitcoin slipped below $7,000 Wednesday after a report that Goldman Sachs is abandoning plans to open a trading desk for cryptocurrencies.

The world’s largest digital currency fell roughly 6 percent to a low of $6,866.06, according to data from CoinDesk.

Goldman still sees the regulatory environment as ambiguous, according to Business Insider, which cited people familiar with the matter. The Wall Street giant has been considering the launch of a new trading operation focused on bitcoin and other digital currencies for the past year. The bank’s CEO Lloyd Blankfein tweeted in October that Goldman was “still thinking about bitcoin.”

“No conclusion – not endorsing/rejecting. Know that folks also were skeptical when paper money displaced gold,” Blankfein said at the time.

Executives now say more steps need to be taken, most of them outside the bank’s control, before a regulated institution would be allowed to trade cryptocurrencies, according to Business Insider.

Goldman would not confirm the report to CNBC, and repeated its only public comment on the matter.

“In response to client interest in various digital products, we are exploring how best to serve them in the space. At this point, we have not reached a conclusion on the scope of our digital asset offering,” Goldman Sachs said in a statement.

Brian Kelly, founder and CEO of crypto hedge fund BKCM, said while this doesn’t have an impact on actual bitcoin trading volume short-term, the report pours cold water on long-term sentiment.

“They were not a part of the ecosystem yet, but to the extent that they represent the institutional herd, this is a negative,” Kelly said.

Bitcoin has been selling in a narrow corridor around $7,000 for the past month. Late Tuesday night, it drove up to $7,400, its highest point since the first week of August, according to data from CoinDesk.

Joe DiPasquale, CEO of cryptocurrency fund of hedge funds BitBull Capital, said that price level represented a selling trigger for some investors who had been waiting for prices to recover.

“Until there’s additional institutional investor interest to drive demand in pricing, many active managers in the space are going to continue to buy low and sell high,” DiPasquale said.

Institutional interest has been a barometer for prices, especially this summer. Rumors of the first-ever bitcoin ETF being approved drove prices over $8,000 in July. Prices later slipped back below $7,000 after the Securities and Exchange Commission rejected the bitcoin exchange-traded funds from ProShares and other crypto ETF plans by GraniteShares, Direxion and the Winklevoss brothers.

Bitcoin prices have struggled to recover to their high near $20,000 hit in December. The entire market capitalization for all cryptocurrencies is down roughly 63 percent this year, according to data from CoinMarketCap.com.

Cryptocurrencies other than bitcoin known as “alt coins” fared even worse on Wednesday. Ethereum, the second largest cryptocurrency was down 13 percent, XRP fell 11 percent, while bitcoin cash and EOS were down 13 and 16 percent respectively.

(BBG) Deutsche Bank Is Said to Be Removed From Euro Stoxx 50 Index

(BBG) Years of losses and strategic drift have cost Deutsche Bank AG a seat among Europe’s elite companies.

Germany’s largest lender has dropped out of the Euro Stoxx 50 index for the first time since its inception in 1998, according to documents seen by Bloomberg. The index, compiled by Deutsche Boerse AG, provides a cross-section of the biggest and most liquid stocks in the euro area.

A loss of confidence in the lender’s ability to restore profitability after a string of scandals and fines has caused a sharp decline in Deutsche Bank’s market value. It has lost money for the last three years, and a growing number of analysts are voicing doubts about Chief Executive Officer Christian Sewing’s latest turnaround plan.

Deutsche Bank’s shares peaked in 2007 and have lost some 90 percent since then. They are down over 37 percent this year alone, but were up 0.7 percent by 11.00 a.m. in Frankfurt on Tuesday.

Benchmark Factor

Inclusion in widely-tracked indexes is becoming more important for companies in a world increasingly dominated by ‘‘passive’’ investment funds. Such funds accounted for 30 percent of all Europe-focused equity investment funds at the end of 2017, according to the Bank for International Settlements. The Euro Stoxx 50 alone is tracked by exchange-traded funds with assets of more than 40 billion euros ($46 billion), data compiled by Bloomberg show. Expulsion from the index will force passive investors to sell as they realign portfolios to include the index’s new constituents.

Stocks dropping out of a benchmark index on average have underperformed the respective gauge by 5.6 percent during the month before the announcement and another 3 percent between the announcement and the actual index change, data collected by LBBW analyst Uwe Streich show. Streich said the main problem for the bank was “reputational.”

“Exiting the Euro Stoxx 50 seems to contradict the bank’s self-image as one of the euro zone’s biggest banks,” he said. “Re-entry will be very difficult.”

The index change is set to take effect on September 24.

In a statement that didn’t directly acknowledge its exclusion, Deutsche Bank said: “Management is firmly committed to executing its announced strategy to improve our bank’s profitability. We expect that this will support the valuation of Deutsche Bank by the market, and therefore increase market capitalization.”

The bank said its commitment and strategy are “unaffected by the announcement of the index provider.”

A Deutsche Boerse spokesman couldn’t immediately comment.

Germany’s second-largest listed lender, Commerzbank AG, risks suffering a similar fate by falling out of the DAX Index, which includes the country’s largest and most liquid stocks. Deutsche Boerse is slated to announce the new composition of the DAX on Wednesday after the market’s close.

The two potential index exits “tell the story of how far behind the curve German banks are,” Andreas Meyer, a portfolio manager at Hamburg-based Aramea Asset Management AG, told Bloomberg in August. “While other European banks keep growing, Germany’s banks are occupied with themselves, unaware of how the competition is attacking them on their home turf.”

(Reuters) Moody’s sounds more alarm over Turkey’s banks, downgrades 20 firms

(Reuters) Ratings agency Moody’s sounded more alarm about Turkey’s banking sector on Tuesday, downgrading 20 financial institutions and citing the increased risk of a deterioration in funding.

The comments from Moody’s are the latest to highlight the risk to Turkey’s banking sector from an ongoing currency crisis. It said the operating environment is now worse than previously expected.

The lira TRYTOM=D3 has fallen some 40 percent so far this year, hit by investor concern about President Tayyip Erdogan’s grip on monetary policy and a widening rift with the United States. Investors are concerned the Turkish economy is set for a hard landing and lenders could see a spike in bad debts.

“The downgrades primarily reflect a substantial increase in the risk of a downside scenario, where a further negative shift in investor sentiment could lead to a curtailing of wholesale funding,” Moody’s said in a statement.

It lowered its “standalone baseline credit assessments” of 14 lenders by one notch, and those of four other banks by two notches. It downgraded the “corporate family ratings” of two finance companies by a notch.

For years Turkish firms have borrowed in euros and dollars, to take advantage of lower rates, but that has exposed firms to substantial currency risk.

In the next 12 months, around $77 billion of foreign currency wholesale bonds and syndicated loans, or 41 percent of the total market funding, needs to be refinanced, Moody’s said.

Turkish banks hold around $48 billion of liquid assets in foreign currency and have around $57 billion in compulsory reserves with the central bank, Moody’s said, adding the latter would not be entirely available.

“In a downside scenario, where investor sentiment shifts, the risk of a prolonged closure of the wholesale market would lead most banks to materially deleverage, or to require external funding support from the government, or the Central Bank.”

In Berlin, a German government official said Germany is not considering providing Turkey with a financial lifeline to help it overcome its currency crisis.

A second German official told Reuters: “You can’t do much from outside but to stress that Turkey must reform itself.”

(ZH) BIS Warns Of “Perfect Storm” For Global Economy

(ZH) To those hoping for a quick resolution to the US-China trade war, Axios had some bad news earlier today, reporting that the trade feud is “likely to last much longer than originally thought — extending well into the second half of next year and perhaps beyond, experts say.” According to Axios, the main reason for the protracted conflict is that neither side is prepared to appear politically weak at home, and both are ready to absorb economic pain.

With few probable winners, the biggest losers would be farmers, users of steel, and consumers in the US, manufacturers of all types will see business leave to neighbors like Vietnam and Malaysia in China, while dampening economic growth in both nations and around the globe.

However, as the general manager of the Bank of International Settlements, Agustin Carstens warned, the greater risk is not how many points of GDP the rising tariffs will subtract from the US and China, but the growing danger to globalization itself, and on Saturday, Karstens delivered a scathing critique of rising protectionism, a not-so-subtle rebuke to Trump’s use of tariffs and trade talks to wring concessions from China, Mexico and many other countries.

Reversing globalization “could increase prices, raise unemployment and crimp growth,” Carstens, the former head of Mexico’s central bank, told fellow central bankers at the Jackson Hole annual economic symposium. Additionally, higher tariffs could (actually, just say would) drive up U.S. inflation and force the Fed to raise rates, driving up the dollar and hurting both U.S. exporters and emerging market economies in the process, Carstens said.

Protectionism also threatens “to unsettle financial markets and put a drag on firms’ capital spending, as investors take fright and financial conditions tighten,” he said.

“These real and financial risks could amplify each other, creating a perfect storm and exacting an even higher price”, the rotund central banker warned.

Bank for International Settlements General Manager Agustin Carstens

Alongside Carstens’ speech, the BIS released a research paper titled “Global market structures and the high price of protectionism” which that estimated that revoking NAFTA would mean a loss to GDP of $37 billion in Canada, $22 billion in Mexico, and $40 billion in the United States, with non-tariff trade barriers accounting for the lion’s share of the losses. Wages would also fall across North America, the research found according to Reuters.

The good news, is that as Bloomberg reported earlier, Mexican and U.S. negotiators have narrowed trade-pact differences in recent days and an agreement on bilateral trade may be announced as soon as tomorrow, with Canada expected to join trade talks once those have been resolved, but the overall future of NAFTA remains unclear.

The bad news is that last week, the United States and China ended two days of talks on Thursday with little progress as their trade war escalated with activation of another round of dueling tariffs on $16 billion worth of each country’s goods. According to Goldman Sachs, there is a 70% chance that Trump will levy an additional $200 billion in incremental tariffs over the next two weeks.

What is odd, is that despite the BIS’ dire warning, Fed Chair Powell and other central bankers have largely stepped around the effect of rising trade frictions on the U.S. economy and monetary policy, while signalling gradual rate hikes ahead. For now, they note that the impact of the tariffs themselves, and related currency gyrations in some countries including Turkey, are not slowing the U.S. economy, and therefore do not require a response.

Furthermore, while numerous business surveys indicate widespread concern about the impact of tariffs, the US economy has yet to be rattled by protectionism.

However, speaking at the final panel in the two-day meeting that examined market structures’ impact on inflation and other metrics that central bankers follow closely, Carstens warned that central bankers ignore trade skirmishes at their peril. And, as Reuters notes, “coming from a fellow former central banker who is now head of the bank for central bankers, the message may resonate.”

Additionally, Carstens highlighted the potential catalysts that could unleash the “perfect storm” he highlighted as the key risk resulting from the interaction of real and financial risks, namely: the trillions in outstanding dollar-denominated debt – whereby a dollar-shortage threatening to cripple international trade – and the growing risk of currency wars:

Consider that non-US banks provide the bulk of dollar-denominated letters of credit, which in turn account for more than 80% of this source of trade finance. The Great Financial Crisis highlighted the fragility of this setup, since non-US banks depend on wholesale markets to obtain dollars. Ten years on, we should not forget how the dramatic fall in trade finance in late 2008 played a key part in globalising the crisis. Any dollar shortage among non-US banks could cripple international trade.

On top of that, trade skirmishes can easily escalate into currency wars, although I hope that they will not. As we saw earlier with Mexico, imposing tariffs on imports tends to weaken the target country’s currency. The depreciation could then be construed as a currency “manipulation” that seemingly justifies further protectionist measures. If currency wars break out, countries may put financial markets off-limits to foreign investors or, on the other side, deliberately cut back foreign investment, politicising capital flows.

In addition, we must be mindful of long-observed knock-on effects from tighter US monetary conditions, given the large stock of dollar borrowing by non-banks outside the United States, which has now reached $11.5 trillion.

His conclusion: “Policymakers in advanced economies should not shrug off the growing evidence that abrupt exchange rate depreciations reduce investment and economic growth in emerging market economies. This has implications for everybody, in that weaker economic activity reduces demand for exports from advanced economies.”

“In the long term, protectionism will bring not gain but only pain,” Carstens said, echoing a familiar talking point of establishment economists. “Not just for the United States, but for us all.”

He may be right, but as long as the US stock market continues to ignore the growing danger of this pain, and hits new all time high, there is zero probability that the Trump administration will change course.

(BBG) Elon Musk Hires Morgan Stanley to Help Take Tesla Private

(BBG) Elon Musk has hired Morgan Stanley to assist him in his potential bid to take Tesla Inc. private, according to a person familiar with the matter.

Morgan Stanley is advising Musk, not the company, its board or a special board committee formed to to evaluate a potential take-private proposal, said the person, who asked not to be identified because the matter is private. The bank suspended coverage of the stock on Tuesday without explanation.

Musk, 47, shocked the financial world Aug. 7 when the chief executive officer tweeted that he wanted to take the electric-car maker private and had “funding secured.” In a blog post, he later indicated that no such financing deal had been closed. The tweet has drawn a subpoena from the Securities and Exchange Commission, according to a person familiar with the matter.

By adding Morgan Stanley to Goldman Sachs Group Inc., Musk has tied up the top two merger advisers in the U.S. this year. Both banks have been lead underwriters on most of the company’s stock and convertible debt offerings. Morgan Stanley is among Tesla’s 20 largest shareholders, with a 0.6 percent stake. Its Tesla analyst, Adam Jonas, has historically been one of the more bullish researchers of the stock.

If they succeed in taking Tesla private, the equity will become much more challenging for investors to buy or sell, said Jim Osman, CEO of The Edge Group, which analyzes special situations.

“The hiring of Morgan Stanley and GS is unfortunate for investors wanting to take a long-term view of holding the stock,” he said. “Many funds and investors won’t be able to participate should the stock go private. Whilst we are a fan of Musk, GS and MS will have to think of something very creative to let the investors share in any future value creation.”

Read more: SEC often outgunned by tech titans

The Palo Alto, California-based automaker didn’t immediately respond to a request for comment. A spokesman for Morgan Stanley declined to comment.

Tesla shares slipped 0.5 percent to close at $320.10 in New York trading. After a roller-coaster month in which they soared to almost $380 before falling back below $300, they are up 2.8 percent this year, best among U.S. automakers.

Morgan Stanley and Goldman Sachs have longstanding ties to Musk, who is also CEO of Space Exploration Technologies Corp. as well as Tesla’s chairman and largest shareholder. As of February 2017, Musk owed Morgan Stanley $344.4 million in personal loans backed by his Tesla shares.

Musk tweeted last Monday that he would be advised by Goldman Sachs and by private-equity firm Silver Lake. But he hadn’t formally hired Goldman yet, people familiar with the matter said on Tuesday. By the next day, Goldman announced that it suspending coverage of the stock because it’s acting as a financial adviser “in connection with a matter that is fundamental” to the company’s value.

(Reuters) Britain can’t afford to close door to EU banks after Brexit

(Reuters)Britain is expected to keep the door open for European Union banks and investors after Brexit to try to preserve London’s global financial clout, irrespective of whether it gets a good trade deal from the bloc, bankers and industry officials say.

Nerves in the City of London financial district were rattled last month when the UK government proposed future financial services trade with the EU based on “reciprocal” arrangements.

Bankers worried this meant that if the EU did not give Britain broad market access, London would impose tit-for-tat restrictions on EU banks or even tighten up treatment of all foreign lenders.

“But the Treasury later told us it does not mean that. Reciprocity would make the City very nervous,” a senior international banker in London said, speaking on condition of anonymity due to the sensitivity of the matter.

The Treasury had no immediate comment on Tuesday.

At stake is one of the most liberal and lucrative financial services trade regimes in the world.

“The City has grown up by being everyone’s playground and that needs to continue. The White Paper was not to be read as limiting market access coming into the UK,” said a senior financial sector official, referring to the government’s Brexit plan published last month.

Britain allows non-EU “third country” banks to operate as a wholesale – but not retail – branch in London, meaning it doesn’t require costly capital cushions that subsidiaries have.

It also allows overseas entities to offer a wholesale service without a permanent UK base, subject to some conditions.

“The UK’s approach to third country firms may be regarded as one of the main factors which have made it one of the world’s leading financial centers,” said a European Parliament study on Brexit.

LEVERAGE

Bankers are waiting to see how EU bank branches in Britain and UK branches in the EU will be treated in future under any trade agreement or no deal scenario.

UK policymakers say Britain should get good terms because the bloc needs City expertise to manage 1.2 trillion pounds ($1.5 trillion) of assets for EU investors, issue bonds and float new companies.

The bloc is also slow to create its own capital markets union to substitute the City, and many EU companies don’t want hikes in costs from fragmented markets, policymakers say.

But 43 percent of UK international and wholesale financial services revenue comes from the EU, the sector’s biggest export market and worth 26 billion pounds ($33 billion). Deutsche Bank estimates that Britain’s current account deficit would be 40 percent higher without this.

In a sign of UK caution, consultants advised regulators to put their open approach to foreign banks into question as a negotiating tactic, but the government did not want to do that, a senior financial official said.

Britain’s finance ministry said in a June paper that if there was no transition deal to smooth the Brexit process after the official departure day in March 2019, then as a general principle Britain would default to treating EU states largely as it does other third countries.

But there are instances where “we would need to diverge from this approach,” it said, without elaborating. It is due to publish a new paper on no-deal contingency plans shortly.

The EU has also said it will treat Britain like other third countries.

“The EU has not given any indication that it won’t allow UK banks to establish branches in the bloc,” said Vishal Vedi, Deloitte’s financial services Brexit leader.

Analysis chart: reut.rs/2ORZlyG

NO TIT FOR TAT

In another sign of pragmatism, Britain has proposed a “temporary permissions regime” to allow EU banks and insurers with branches in London to continue operating after March for three years, if there is no transition period.

The EU has not reciprocated for UK bank branches in the bloc, but is urging lenders in the City to gets licenses for their European hubs.

Andrew Bailey, head of Britain’s Financial Conduct Authority, says a key question is whether EU customers will be allowed to continue doing business in London after Brexit. France has taken a tough stance on City access to the bloc.

“The FCA’s optimal position is open access, but if we can’t get that, what does the UK do?” said Jonathan Herbst, a financial services lawyer at Norton Rose Fulbright.

Britain will also be under pressure to respond if Brussels rejects its calls to ease up the EU’s “equivalence” rules for market access used by Japan and the United States. The rules give some market access to third-country firms if their home regulators have equivalent policies to those used in the EU.

The equivalence rules have also been put into UK law and in theory Britain could apply them against the bloc in retaliation.

But no matter how difficult the EU may be in respect of UK firms trying to do business there, Britain has no choice but to stick with open borders, said Simon Gleeson, a financial services lawyer at Clifford Chance.

“There is no way the UK can go for tit-for-tat. What the UK can’t do is maintain openness for Americans and impose restrictions on Europeans. The only leverage we have is that if you cut off access to us, you are hurting yourself, “ he said.

P.O. (GUA) RBS bankers joked about destroying the US housing market

P.O.

That the world big banks had sold, mainly in the US, products sub prime related, that were worth nothing or quasi nothing we all knew.
Unfortunately.

But what is striking in this case of the Royal Bank of Scotland, now under investigation in the US, are the terms and words that RBS’s own US Chief Credit Officer used at the time to describe RBS’s own products…

Underwriting standards were “Like quasi organised crime” and the packages of subprime loans were “total f***ing garbage”. This account is in the US Department of Justice damning report (click here to see).

What people usually don’t realise is that the, until recently, almost total impunity of these large World banks has to do with the fact that it’s the banks that actually create money when they lend to their costumers.

Central Banks only account nowadays for around 7% of the money created. And Authorities and Regulators have lived since the first third of the 20th century under what i call the 1929/33 syndrome. The Great Depression occured, among other reasons, because the banks could not create money. Essencialy because of the Gold Standard.

So the reasoning was that nothing could endanger money creation by banks…
We all know were this idiocy took us…

Out of the blue I cannot remember one of these large World Banks were crimes were not committed.

In a simmilar idiocy, 
take a look to the case of the crashing Turquish Lira, after the announcing of the US retaliation measures… Mr Erdogan, which in my point of vue is a dictator, is recommending prayers against the Lira devaluation…

Give us a break!

Francisco (Abouaf) de Curiel Marques Pereira

(GUA) Transcripts of pre-financial crisis conversations show senior bankers’ disregard for customers.

A boarded up building in Cleveland, Ohio, in January 2008
 A boarded up building in Cleveland, Ohio, in January 2008. In the build up to the crisis mortgage lenders were incentivised to make as many loans as possible. Photograph: Timothy A. Clary/AFP/Getty Images

RBS bankers joked about destroying the US housing market after making millions by trading loans that staff described as “total fucking garbage”, according to transcripts released as part of a $4.9bn (£3.8bn) settlement with US prosecutors.

Details of internal conversations at the bank emerged just weeks before the 10-year anniversary of the financial crisis, which saw RBS rescued with a £45bn bailout from the UK government.

The US Department of Justice (DoJ) criticised RBS over its trade in residential mortgage backed securities (RMBS) – financial instruments underwritten by risky home loans that are cited as pivotal in the global banking crash.

It said the bank made “false and misleading representations” to investors in order to sell more of the RMBS, which are forecast to result in losses of $55bn to investors.

Transcripts published alongside the settlement reveal the attitude among senior bankers at RBS towards some of the products they sold.

The bank’s chief credit officer in the US referred to selling investors products backed by “total fucking garbage” loans with “fraud [that] was so rampant … [and] all random”.

He added that “the loans are all disguised to, you know, look okay kind of … in a data file.”

The DoJ said senior RBS executives “showed little regard for their misconduct and, internally, made light of it”.

In one exchange, as the extent of the contagion in the banking industry was becoming clear, RBS’ head trader received a call from a friend who said: “[I’m] sure your parents never imagine[d] they’d raise a son who [would] destroy the housing market in the richest nation on the planet.”

He responded: “I take exception to the word ‘destroy.’ I am more comfortable with ‘severely damage.’”

Another senior banker explained to a colleague that risky loans were the result of a broken mortgage industry that meant lenders were “raking in the money” and were incentivised to make as many loans as possible.

Employees who might raise the alarm about the riskiness of such lending “don’t give a shit because they’re not getting paid”, he said.

The bank made “hundreds of millions of dollars” from selling RMBS, the DoJ said, while disguising the risk they posed to investors, which included a group of nuns who lost 96% of their investment.

By October 2007, as signs of stress began to show in the banking system, RBS’ chief credit officer wrote to colleagues expressing his true feelings about the burgeoning volume of subprime loans in the housing market.

He said loans were being pushed by “every possible … style of scumbag”, adding that it was “like quasi-organised crime”.

“Nobody seems to care,” he added.

The DoJ criticised RBS’ failure to do due diligence on the loans it was packaging, saying the bank feared it would lose out to rivals if it performed stricter tests.

One analyst at the lender referred to the bank’s due diligence procedures as “just a bunch of bullshit”, according to the transcripts.

When the bank became concerned about the poor quality of loans and started imposing tighter due diligence, one senior banker complained, saying: “Oh, God. Does anyone want to make money around here any more?”

RBS expected to make $20m from one deal that involved trading particularly risky loans, but faced resistance from the bank’s chief credit officer.

A senior executive responded to the concerns by telling the bank’s head trader: “Please don’t fuckin’ blow this one. We need every dollar we can get our hands on.”

Internal conversations between bankers also offer some insight into their growing realisation of the poor quality of the loans the bank owned and sold.

In September 2007, one trader referred to an appraisal of loans as giving “pretty shitty results”.

The transcripts were released by the DoJ as it confirmed the details of the settlement with the bank over its trading in RMBS.

RBS said: “Under the terms of the settlement, RBS disputes the allegations but will not set out a legal defence, while the settlement does not constitute a judicial finding.”

Certainty over the scale of the settlement will allow the bank to pay its first dividend in a decade this year.

The dividend is worth £240m and the Treasury will receive £149m as RBS is still 62%-owned by the government.

Ross McEwan, RBS chief executive, said: “This settlement dates back to the period between 2005 and 2007. There is no place for the sort of unacceptable behaviour alleged by the DoJ at the bank we are building today.”

He added that the bank could now “focus our energy on serving our customers better”.

But league tables published by the Competition and Markets Authority on Wednesday placed RBS joint bottom for customer service, with fewer than half of customers saying they would recommend the bank to a friend.

RBS will have to publish the results in branches, on its website and mobile app from today.

(ZH) Lord Rothschild: The New World Order Is At Risk

(ZH) Over the past three years, an unexpected voice of caution has emerged from one of the most legendary families in finance: Lord Jacob Rothschild.

Lord Jacob Rothschild

Readers may recall that as part of the RIT Capital Partners 2014 annual report commentary, the scion of Rothschild family warned that “the geopolitical situation is most dangerous since WWII.” One year later, Jacob Rothschild again warned about the outcome of “what is surely the greatest experiment in monetary policy in the history of the world“, and then again in August 2017 he cautioned that “share prices have in many cases risen to unprecedented levels at a time when economic growth is by no means assured.”

Little did he know that they were only going to keep rising, but related to that, he also made another warning which the market has so far blissfully ignored:

The period of monetary accommodation may well be coming to an end. Geopolitical problems remain widespread and are proving increasingly difficult to resolve.

Fast forward to today when in the latest half-year commentary from RIT Capital Partners, Lord Rothschild has made his latest warning to date, this time focusing on the global economic system that was established after WWII, and which he believes is now in jeopardy.

The billionaire banker pointed to the US-China trade war and the Eurozone crisis as the key problems putting economic order at risk, and the lack of a “common approach” – a reference to the gradual unwind of globalization in the wake of President Trump – that has made “co-operation today much more difficult”:

In 9/11 and in the 2008 financial crisis, the powers of the world worked together with a common approach. Co-operation today is proving much more difficult. This puts at risk the post-war economic and security order.”

It wasn’t clear if he was referring to the post-war fiat standard that emerged once FDR devalued the dollar relative to gold, and then fixed a price for the yellow metal, a tenuous link that was subsequently destroyed by Nixon who finally took the US off the gold standard, or the primacy of the dollar which emerged as the world’s reserve currency after the end of WWII, but whenever one of the people who profited handsomely from the “post war world order” warns it may be on its last legs, it may be time to worry.

With global risks growing, how is Rothschild positioned? The Lord writes that “in the circumstances our policy is to maintain our limited exposure to quoted equities and to enter into new commitments with great caution” and indeed, in the first half, RIT had a net quoted equity exposure of only 47%, historically low. The reason: the iconic banking family is concerned that the 10-year bullish cycle and market rally could finally be ending.

The cycle is in its tenth positive year, the longest on record. We are now seeing some areas of weaker growth emerge; indeed the IMF has recently predicted some slowdown.

While Rothschild noted that “many of the world’s economies have enjoyed a broad-based acceleration not seen since the aftermath of the financial crisis of 2008, with as many as 120 countries seeing stronger growth last year” he also cautioned that “we continue to believe that this is not an appropriate time to add to risk. Current stock market valuations remain high by historical standards, inflated by years of low interest rates and the policy of quantitative easing which is now coming to an end.

One potential risk is Europe, where debt levels have reached “potentially destructive levels”:

The problems confronting the Eurozone are of concern – both political and economic – given the potentially destructive levels of debt in a number of countries.

There is also the threat that the global trade war escalates substantially from here, as Chinese stocks have learned the hard way:

The likelihood of trade wars has increased tension and the impact on equities has been marked,for example by early July the Shanghai Composite Index had dropped some 22% from its peak in January.

Rothschild also echoed the recent warning from the head of the Indian Central Bank, warning that the shrinking of global dollar liquidity is hurting emerging markets:

Problems are likely to continue in emerging markets, compounded by rising interest rates and the US Fed’s monetary policy which has drained global dollar liquidity. We have already seen the impact on the Turkish and Argentinian currencies.

Finally, Rothschild remains understandably “concerned about geo-political problems including Brexit, North Korea and the Middle East, at a time when populism is spreading globally.

(EUobserver) Denmark to investigate Danske Bank over money laundering

(EUobserver) Danish state prosecutors on Monday launched an official investigation into Danske Bank over allegations that the country’s biggest lender has been involved in money laundering through its Estonian branch. Meanwhile, Bill Browder, champion of the Russian whistleblower Sergei Magnitski, killed in Russia, requested a criminal investigation of 26 officials of the Estonian branch of Danske Bank, who allegedly enabled the money laundering, Estonian daily Postimees reported.

(BBG) Deutsche Bank Has Some Debt Cut by Moody’s to a Step Above Junk

(BBG) Deutsche Bank AG had the credit rating of one type of debt cut by Moody’s Investors Service after a change in German law last month paved the way for a more senior kind of borrowing.

In a move that was widely anticipated, Moody’s downgraded the bank’s senior non-preferred debt to Baa3 — the lowest investment grade — from Baa2 and reclassified the bonds as “junior senior” debt. The government is now less likely to support what are currently senior notes, the ratings firm said in a statement Friday.

Deutsche Bank Chief Financial Officer James von Moltke, in a call with analysts on July 25, called the expected downgrade a “technical adjustment” as a result of the legislative change. “The good news” is that Deutsche Bank can now issue senior preferred debt, Moltke said. It will start doing so “in the near term,” Group Treasurer Dixit Joshi said two days later on a separate call, adding that he expects funding costs to decline as a result.

Elevated funding costs have emerged as a particular problem for Deutsche Bank as they put it at a disadvantage to its competitors. Spreads on the bank’s five-year senior credit default swaps — a common proxy indicator for those costs — have almost doubled since the beginning of the year as credit investors have taken a dim view of the bank’s ability to return to healthy profitability soon.

Change of Direction

A rating downgrade of the bank by S&P Global Ratings two months ago contributed to the rise in CDS spreads. Deutsche Bank is “absolutely focused on changing the direction of our ratings,” von Moltke said on the July 25 call.

The new German law, which came into effect on July 21, allows banks to issue a class of senior debt that will be practically immune from losses in the case of a bank failure. That will give investors a safer asset to buy, likely eliminating at least some of the disadvantage in funding costs. The legislative change comes after a 2015 law modified existing senior bank bonds so that they could absorb losses in a resolution process.

France chose a different approach. It kept existing notes unchanged and instead created a new type of debt that can more readily be ‘bailed-in.’ The European Union ultimately favored the French option, leaving Germany — and the country’s banks — out of line with the rest of the bloc.

“The legal hierarchy of bank claims in Germany is now consistent with most other European Union countries,” Moody’s said in the statement Friday. The new preferred debt securities will be assigned an A3 credit rating by Moody’s, according to a Deutsche Bank presentation. That would place them three notches above the rating on its non-preferred debt.

In a separate statement, Moody’s said it downgraded long-term senior unsecured debt of 14 German banks.

(City AM) Deutsche Bank shifts half its clearing from London to Frankfurt

(City AM)

Deutsche Bank Announces 2012 Financial Results

Source: Getty

Deutsche Bank has moved almost half of its euro-clearing business from London to Frankfurt in one of the clearest signs of the impact Brexit is having on the City yet.

The Financial Times reports that the bank – one of the five largest clearers of interest derivatives – has shifted around half its operation to the German city over the last six months. At the start of the year, the activity was almost entirely carried out in London.

The City has feared businesses may shift clearing away to European hubs since the EU referendum result came in, with repeated warnings about how fragmentation may lead to increased risks. Until now London’s LCH has been the king of clearing euro-denominated interest rate swaps, processing up to €1tn of notional deals per day.

Last month Germany’s finance minister Olaf Scholz said it was “indepensable” that clearing was carried out “in full conformity with EU standards,” suggesting Frankfurt would be the natural place.

LCH parent company London Stock Exchange Group has warned that as many as 100,000 jobs could leave the City if London loses its status as the euro clearing hub.

However, Deutsche Bank‘s global co-head of institutional and treasury coverage told the FT the move had not led to a wholesale relocation of jobs.

“It’s the same London-based person who clears a transaction. We’re just using a different clearing house,” he said.

Neither Deutsche Bank nor LCH replied to requests for comment this morning.

(ZH) Deutsche Bank FICC Tumbles 17%, Worst Q2 Since The Financial Crisis

(ZH) Back on July 16, in an attempt to boost its flailing stock which just weeks earlier hit an all time low, Deutsche Bank reported preliminary results that were better than analysts had expected. It saved the not soo good news for its official earnings release earlier this morning, when the biggest German bank reported that revenue from FICC, or trading of fixed-income, currency and commodities, traditionally a bank’s most profitable segment, tumbled 17% from a year earlier to €1.37 billion ($1.6 billion) from €1.65 billion, the fifth consecutive drop and the lowest figure for the the second quarter since the financial crisis.

By comparison, the big five U.S. investment banks saw total debt trading revenue rise by 6.7% over the same quarter.

Some other key results from the second quarter:

  • Revenue: €6.59BN vs €6.62BN Y/Y
  • Fixed income trading: €1.37BN, vs €1.65Bn Y/Y
  • Equity trading: €540MM vs €577MM
  • CIB revenue: €3.58BN vs. €3.62BN y/y
  • Pretax Profit: €711MM, vs €822MM
  • Net Income €401MM, vs €466MM

Commenting on the results, JPM analyst Kian Abouhossein said that “Restructuring on track but the bank is not out of the woods yet on revenue.”

Sewing, who unexpectedly took over as CEO from John Cryan less than four months ago, has been scrambling to reverse what the bank has called a “vicious circle” of declining revenue, sticky expenses and rising funding costs.

Unfortunately, as Bloomberg notes, the vicious cycle is unlikely to break soon as higher funding costs, cuts to the U.S. rates business and exchange-rate swings will probably mean that revenue from fixed-income trading will be “slightly lower” this year. Still, the bank said it’s “confident of maintaining its position as the fourth-largest house globally in fixed income and currencies.”

“In the second quarter we accelerated the reshaping of our bank significantly and proved the resilience of our global business,” Sewing said in a statement. “We’re making important changes to our core businesses as promised, we’re headed in the right direction on costs, and our balance sheet quality is strong.”

Despite the declines in trading, revenue at the securities unit, which is now the biggest contributor overall to income, held up in the second quarter, falling just 1%. That reflected higher income from the advisory business as well as several one-time effects. Global transaction banking increased 4 percent, a sign that the business has turned a corner, Sewing said.

In general, revenue stabilized in the quarter and adjusted costs fell slightly, with Sewing pledging more discipline on expenses.

The biggest problem, however, facing DB is not sliding revenues but employee morale and retention: sewing is cutting at least 7,000 jobs and retrenching in investment banking areas such as prime finance, U.S. rates, and corporate finance in the U.S. and Asia.

“It is comforting that Deutsche Bank is on track but we believe improving returns from a low level will take time,” said Anke Reingen, an analyst at RBC Capital Markets, in a note to investors.

It may be comforting to Anke, but to investors who have stuck with the company for the past decade, there is little that can qualify as “good news” at this point.