Category Archives: Deutsche Bank

(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

(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.

DBKGN.DEXETRA
+0.05(+0.46%)
DBKGn.DE
  • DBKGn.DE

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.

DBKGN.DEXETRA
-0.04(-0.43%)
DBKGn.DE
  • DBKGn.DE
  • CBKG.DE
  • .GDAXI

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.

(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.”

(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.

(BBC) Deutsche Bank’s US unit fails Fed’s stress test

(BBC)

This file photo taken on May 2, 2018 shows a view of the Federal Reserve in Washington, DCImage copyrightAFP/GETTY
Image captionThe Federal Reserve administers annual “stress tests” on the largest banks operating in the US

Deutsche Bank’s US division has failed the second round of the Federal Reserve’s annual two-stage stress tests, designed to assess how well the sector could withstand another financial crisis.

The German lender suffered from “widespread and critical deficiencies” in parts of its business, the Fed said.

Goldman Sachs and Morgan Stanley were only granted “conditional” passes.

But 31 of the 35 banks tested were given the all-clear.

Stress tests were introduced in the wake of the 2008 financial crisis and every year America’s central bank, the Federal Reserve, puts the country’s banks, including foreign subsidiaries operating in the country, through their paces.

The Fed measures whether banks are holding sufficient capital to cope with a recession and in the second part of the process it focuses on banks’ “capital plans” such as how much cash they intend to return to shareholders. However this is the first year that the results of the US units of foreign banks have been publicly released.

All of the 35 largest banks subject to the tests passed the first part of the testslast week.

But the Fed found Deutsche Bank’s US arm had “material weaknesses in the firm’s data capabilities and controls supporting its capital planning process, as well as weaknesses in its approaches and assumptions used to forecast revenues and losses under stress”.

The verdict is another blow for the troubled German lender whose financial health has been under the spotlight recently. And it will require the bank to make changes to the way it operates in the US.

Goldman Sachs and Morgan Stanley were given passes, but will not be permitted to increase the amount they return to shareholders beyond levels in line with the last couple of years, in order to bolster their capital cushions.

The Fed said it was also granting a conditional pass to Boston-based State Street, which will be required to take additional steps to manage and analyse its exposure to losses.

Last year was the first time all banks passed the second round of the tests.

The second part of the tests is closely watched because it determines how much firms can return to shareholders in the form of items like share buybacks and dividends.

‘One-off event’

The Fed said it had granted the conditional pass to Goldman and Morgan Stanley because the companies’ results had been skewed by tax changes passed last year.

The tax overhaul lowered the corporate rate from 35% to 21%, but led to larger-than-usual one-off tax bills for many banks, as a result of other changes to how losses and overseas profits are taxed.

“This one-time reduction does not reflect a firm’s performance under stress and firms can expect higher post-tax earnings going forward,” the Fed said.

Despite the restrictions, Goldman will still be permitted to spend up to $6.3bn on share buybacks and dividends this year.

Morgan Stanley said it planned to return $6.8bn to shareholders.

Making progress

The decision is the latest blow for troubled Deutsche Bank. Last month the firm announced more than 7,000 job cuts and its credit rating was cut by Standard & Poor’s. The bank reported an annual loss of €500m (£438m) at the end of February.

Deutsche said its US division had “made significant investments to improve its capital planning capabilities as well as controls and infrastructure.”

“Deutsche Bank USA continues to make progress across a range of programmes and will continue to build on these efforts and to engage constructively with regulators to meet both internal and regulatory expectations,” the bank said.

The bank will be required to improve its operations, risk management and governance as a result of the test-failure. It will not be able to make distributions to its German parent firm without the Fed’s approval.

(ZH) Deutsche Bank Tumbles To New Record Low, Drags European Banks

(ZH) Global systemic fears re-emerged this morning, when in addition to ongoing concerns about trade wars which dragged Chinese stocks deeper into a bear market as the Yuan fell for a 10th consecutive day, now there are European banks to also worry about.

Having been relatively stable for much of the recent slide, on Wednesday morning, Deutsche Bank came under heavy selling pressure, tumbling 5% shortly after the start of trading, and dropping to a new all time low of €8.76, and bringing its market cap to just $21BN. By comparison, JPMorgan’s market cap is $357BN.

The stock has since rebounded modestly, and was down 2.3% last, after breaking below €9 for the first time since 2016, when Germany’s largest bank was seen to be on the verge of collapse…

… however the dead cat bounce appears to be nothing more than a temporary respite: “Falling bellow the €9 level adds more pressure to the stock as that was seen as a technical low bottom,” Ignacio Cantos, investment director at ATL Capital in Madrid, told Bloomberg.

The drop in Deutsche Bank sent the The Stoxx Banks Index down 1.8%, to the lowest level since 2016. European Banks Index is now 14% down YTD, of which Deutsche Bank is the worst performer, down 44% YTD.

And sent the index of the global systemically important banks to a 14-month low.

What caused the slump? As Bloomberg’s Paul Dobson writes, there is plenty to worry about besides the usual worries about trade wars, emerging markets, and Italy, including hedge funds warning of a crisis, talk of higher counter-cyclical buffers, as well as sliding bond yields, the deflationary bogeyman for European banks, which in turn is sending European credit risk higher this morning.

Whatever the reason, it appears that whatever risks were latent and starting to emerge as a result of trade war concerns as starting to spread as contagion now hits Europe’s arguably most sensitive sector.

(MW) Deutsche Bank to sell $1 bln shipping-loan book

(MW) Deutsche Bank AG (DBK.XE) said Tuesday that it has agreed to sell a $1 billion shipping-loan portfolio to an entity owned by funds Oak Hill Advisors and Varde Partners.

The transaction is expected to close early in the third quarter, the bank said. It didn’t disclose the name of the entity.

“Following this disposal and other derisking strategies we have implemented, the bank will be left with a performing and a run-off shipping book,” Deutsche said.

(Nasdaq) Deutsche Bank’s misleading CDS hide a wider truth

(Nasdaq) Pity poor Christian Sewing. As if the Deutsche Bank boss didn’t have enough on his plate, prices for the German lender’s credit default swap spreads have ballooned. That matters less than it might seem, but underlines a worrying scepticism towards the new CEO’s strategy.

In fact, the rise in CDS spreads has limited immediate consequences. It could theoretically affect up to 176 billion euros of funding that Deutsche raises from wholesale markets. But the bank only needs to renew around 25 billion euros this year, of which it has already issued 11 billion euros. The majority of the balance, around 7 billion euros to 9 billion euros, will rank ahead of unsecured debt and are relatively unaffected by CDS prices. That leaves just 5 billion euros to 7 billion euros of bonds left to issue.

Higher spreads might also spook funds and other banks that trade with Deutsche, making them less willing to do business. But the bank argues that counterparties rank above senior unsecured creditors under German law, meaning they should not be too worried about short-term changes in its CDS spreads.

However, the rise in Deutsche’s CDS does reflect growing concerns about its weak profitability – and whether Sewing will enjoy any more success in his restructuring than predecessor John Cryan. If Sewing struggles, the bank’s funding costs will creep up, and rating firms lower their assessment of its creditworthiness. Over time, that would hurt Deutsche’s profitability, and cause it to lose more market share.

Deutsche is targeting a 10 percent return on tangible equity by 2021. UBS reckons that implies 32 billion euros of revenue, or growth of 4 percent for the next four years. The last time Deutsche enjoyed that level of growth was between 2009 and 2012. Little wonder investors remain sceptical.

– The spread on Deutsche Bank’s five-year credit default swaps has more than doubled from around 70 basis points at the beginning of the year to 167 basis points on June 11, according to Eikon.

– Credit default swaps are contracts used to protect against the risk of a company defaulting, or to speculate on a change in its creditworthiness. A spread of 166 basis points means it would cost 166,000 euros annually to hedge 10 million euros of bonds.

– Deutsche Bank is currently undergoing a restructuring under new Chief Executive Christian Sewing to boost returns and earn a 10 percent return on tangible equity by 2021, up from a negative 1.4 percent return in the latest financial year. Sewing said on April 26 that he wanted to shift the bank away from volatile investment banking “to more stable revenue sources” and strengthen its core business lines.

(BBG) Who Really Runs Deutsche Bank?

(BBG) Poor leadership has left investors in the dark about the lender’s strategy and direction.

What a gift to mark the European Central Bank’s 20th anniversary. Germany’s largest lender, Deutsche Bank AG, is being battered by financial markets, hounded by U.S. regulators, and downgraded by credit-rating companies.

It’s fitting then that, despite CEO Christian Sewing’s effort at a pep talk on Friday, it is sources from the ECB that have come out to reassure markets.

There are eerie parallels between the bank’s misery and the situation under Sewing’s predecessor, John Cryan, in 2016. Back then, the firm seemed to be veering from one existential crisis to another, from concerns over its ability to pay the interest on some of its debt, through to the cost of a multi-billion-dollar U.S. mortgage settlement.

Cheap bank funding from the ECB and implicit support from the German government eventually calmed markets, while Cryan’s promise of a leaner, less risky Deutsche Bank helped secure $8.5 billion in fresh capital from investors. The survival hurdle was cleared.

What’s concerning today, after two straight annual losses in 2016 and 2017, is that so little seems to have changed. The bank has a new CEO, but still no clear answer about how it will become a structurally and consistently profitable business.

Last week’s promise of more than 7,000 job cuts seemed to herald yet more revenue shrinkage and staff defections. Management’s mixed messages on whether the firm will cut back, stand still or double down on the U.S. market — one where it frankly can’t compete as a full-service institution — have sown confusion. Deutsche is eyeing a 10-percent return on tangible equity, but JPMorgan analysts reckon that it will be only be at half that by the end of 2020. It’s grim.

Sewing’s attempts at reassuring staff and investors won’t work without a clearer picture about what the bank is about to embark on and what Deutsche Bank will look like when it reaches its destination.

“There’s no reason for us to be discouraged,” Sewing told colleagues in his latest missive. “We have reduced risk by billions of euros, we have strengthened capital and we have reorganized our bank.”

This sounds like a farewell from his predecessor, not the opening salvo of a new arrival. It would be better to warn staff that the bank is about to go through hell, but will come out better on the other side. Rival UBS Group AG took steps years ago to exit business lines and slash jobs; Deutsche Bank still needs to do likewise.

This all requires tough decisions and, ultimately, leadership. Sewing has had an inauspicious start, but still has time to deliver more than what he has promised. Until then, expect investors to look to policymakers, rather than management, for reassurance about Deutsche Bank’s future.

(Reuters) Australia threatens ANZ, Deutsche and Citi with criminal charges over share issue

(Reuters)bAustralia is preparing criminal cartel charges against the country’s third-biggest bank and underwriters Deutsche Bank and Citigroup over a $2.3 billion share issue, in an unprecedented move with potential implications for global capital markets.

The pending charges, which can carry hefty fines and 10-year prison terms, threaten to change the way institutional capital raisings are handled, and do further damage to the reputation of Australian lenders already mired in scandal.

The Australian Competition and Consumer Commission (ACCC) said federal prosecutors would charge Australia and New Zealand Banking Group Ltd (ANZ.AX), its Treasurer Rick Moscati, the two investment banks and several more unnamed individuals over the 2015 stock placement.

All three banks denied wrongdoing and vowed to defend the charges, with Citigroup saying the regulator was effectively criminalizing practices long seen as the norm in the financial industry.

“The charges will involve alleged cartel arrangements relating to trading in ANZ shares following an ANZ institutional share placement in August 2015,” ACCC Chairman Rod Sims said in a statement.

“It will be alleged that ANZ and the individuals were knowingly concerned in some or all of the conduct.”

The third underwriter, JP Morgan, was not named by the regulator as a target and declined to comment.

Australia has some of the toughest anti-cartel laws in the world, however the decision to pursue criminal charges surprised experts given they are harder to prosecute than civil charges.

The move was “almost unique” in Australian corporate history and indicated prosecutors had a high level of confidence in their case, said Andrew Grant, a banking expert at the University of Sydney Business School.

ANZ shares were 2 percent lower on Friday afternoon, while other banks were down less than 1 percent. The broader market was down 0.2 percent.

Rating agency Moody’s said on Friday the charges were “credit negative” for ANZ.

THE CAPITAL RAISING

In 2015, Australian banks were under pressure to meet new capital requirements, prompting ANZ and larger rival Commonwealth Bank of Australia (CBA.AX) to raise a combined A$8 billion in a single week.

The lead managers did not disclose they kept about 25.5 million shares of the 80.8 million shares issued, ANZ said on Friday, a fact that is being investigated separately by the corporate regulator.

The Australian Shareholders’ Association said the pending charges should trigger reforms to capital raising procedures to ensure greater transparency and prevent investment banks profiting from share sales while retail investors have their holdings diluted.

As new bank equity flooded the market, ANZ shares closed 7.5 percent lower on Aug. 7, 2015, when the Melbourne-based lender announced it had completed the institutional component of the raising, according to a Reuters analysis.

ANZ shares took over a year to recover to their pre-raising value of A$32.58.

The joint underwriters allegedly reached an understanding on the disposal of shares, prompting the cartel criminal charges, Citigroup (C.N) said on Friday.

“Underwriting syndicates exist to provide the capacity to assume risk and to underwrite large capital raisings, and have operated successfully in Australia in this manner for decades,” the New York-headquartered investment bank said.

Criminal charges for share underwriters had never been considered by an Australian court and had never been addressed in guidance notes published by regulators, it added.

“If the ACCC believes there are matters to address, these should be clarified by law or regulation or consultation,” it said.

Deutsche Bank (DBKGn.DE) said it was cooperating with investigators and took its responsibilities “extremely seriously”.

Caron Beaton-Wells, a professor of competition law at University of Melbourne, said the ACCC and the prosecutor would only bring criminal charges if they were satisfied they would be proven.

ANZ.AXAUSTRALIA STOCK EXCHANGE
-0.41(-1.51%)
ANZ.AX
  • ANZ.AX
  • CBA.AX
  • C.N
  • DBKGn.DE
  • AMP.AX

“The ACCC has long said … that the most potent deterrent for cartel conduct is a potential jail term,” Beaton-Wells said.

“I don’t think it’s a sudden decision to ramp up, just that it’s taken a long time to find conduct for proceeding criminally.”

The development compounds a publicity nightmare for Australia’s biggest financial firms as they grapple with almost daily allegations of wrongdoing at a public inquiry which is scheduled to run to the end of the year.

Barristers for the inquiry have raised the prospect of criminal charges against the country’s top wealth manager, AMP Ltd (AMP.AX), over allegations it misled the corporate regulator.

No. 1 lender Commonwealth Bank is also facing a separate civil lawsuit alleging thousands of breaches of anti-money laundering protocols.

The allegations against some of Australia’s biggest companies and most-traded stocks have sparked several class action law suits designed to compensate investors who lost out as a result of poor banking and fund manager practices.

(NYP) Deutsche Bank reportedly set to lay off 10,000 workers

(NYP)

Heads are rolling at Deutsche Bank again.

The beleaguered German bank is reportedly planning to lay off as many as 10,000 employees, or 10 percent of its workforce, through next year.

The planned cuts, which are coming about two months after the bank elevated its new CEO Christian Sewing, accelerate and deepen layoffs that were planned by the last top exec, John Cryan, the Wall Street Journal reported Wednesday, citing sources.

Cryan had planned to shed 9,000 positions around the world by 2020. It’s unclear how many of those had actually been cut, although the bank reportedly laid off 400 workers in the US last month. Among the deep cuts are a full-on retreat from stock trading in the US and a pullback in other parts of the world.

The planned firings come after nearly a decade of scandals, settlements and management missteps.

The bank was a dominant Wall Street trading house until the 2008 financial crisis. Since then, it has been trying to cut costs and placate unhappy shareholders who are sick of seeing the bank’s stock trail peers like JPMorgan Chase.

In one particularly desperate cost-slashing move, Deutsche Bank recently shortened its paid “gardening” leave periods for departing bankers — a policy designed to protect the bank’s competitive information — to 30 days from as much as 90 days previously, The Post first reported last week.

The bank has also shut down much of its Houston energy trading operations, and is also moving to smaller offices in Midtown Manhattan, from Wall Street.

Kerrie McHugh, a Deutsche Bank spokeswoman, declined to comment.

(BBG) Eisman of ‘The Big Short’ Fame Recommends Shorting Deutsche Bank

(BBG) Eisman of ‘Big Short’ Says ‘Deutsche Bank Is a Problem Bank’

Steve Eisman, the Neuberger Berman Group money manager who famously predicted the collapse of subprime mortgages before the 2008 financial crisis, recommended shorting Deutsche Bank AG shares.

“Deutsche Bank is a problem bank,” Eisman said in a Bloomberg Television interview in Hong Kong. The German lender has “profitability issues,” and will probably have to raise capital next year, he said, without disclosing his position on the shares. A Deutsche Bank representative declined to comment on the remarks.

New Chief Executive Officer Christian Sewing is embarking on a sweeping overhaul of the struggling investment bank to focus more on European clients, walking away from ambitions to be a top global securities firm. Germany’s largest lender will scale back U.S. rates sales and trading, reduce the corporate finance business in the U.S. and Asia and review its global equities business. The measures will lead to a “significant reduction” in the workforce this year.

The firm has to “shrink dramatically,” Eisman said.

Deutsche Bank shares have slumped almost 34 percent in the past 12 months, the second-worst performance on the MSCI Euro index. The decline also dwarfed the 4.9 percent drop in the Bloomberg Europe 500 Banks index in the same period. Deutsche shares gained 0.4 percent in morning trading on Monday.

While Deutsche Bank’s return on equity trails that of its main competitors, the bank’s capital cushion is comparatively strong. It boasts a Tier 1 equity capital ratio of 13.4 percent, above the average among its largest peers, data compiled by Bloomberg show.

Eisman also recommended bearish bets against Canadian financial companies and reiterated that he is still short Wells Fargo & Co.

The investor’s early bets against the housing market before the 2008 crisis were chronicled in Michael Lewis’s 2010 book “The Big Short,” which highlighted money managers who profited from the market turmoil. A character based on him was played by Steve Carell in the movie of the same name.

Eisman worked at hedge fund FrontPoint Partners LLC when he made money betting against the U.S. housing market. Eisman joined New York-based Neuberger Berman after closing his hedge fund Emrys Partners in 2014.

+++ P.O. (BBG) Deutsche Bank Is Said to Weigh Cutting U.S. Staff About 20%

P.O.

…And the question is…

…What is Deutsche Bank’s future as an investment bank taking into account all the mishap’s, all the scandals, all the law suits (most of them not reflected in the balance sheet),and the loss of credibility?

…And taking into account what it seems to be an innate corporate culture of not abiding by any rules.

…I would argue somber at least.

…And that’s being kind.

Please be so kind and revisit my Personal Opinions on Deutsche Bank

Thank you for your time.

Francisco (Abouaf) de Curiel Marques Pereira

(BBG) Deutsche Bank AG is considering a sweeping restructuring in the U.S. that could result in the firm cutting about 20 percent of staff in the region, according to people briefed on the matter.

The bank is nearing a decision and the final reductions may end up lower, one of the people said, asking not to be identified because the details are confidential. Bloomberg reported in April a plan to slash more than 10 percent of jobs in the U.S. — where its workforce was 10,300 at the end of 2017 — as the German lender retreats from businesses it deems less competitive.

“There are no such plans,” said Joerg Eigendorf, a spokesman for the firm in Frankfurt.

Deutsche Bank, led by Chief Executive Officer Christian Sewing, is considering cuts to businesses including prime brokerage, rates and repo, according to a bank statement last month and people familiar with the matter. The firm is already planning to close an office in Houston and shrink its presence in New York City, moving from Wall Street to a midtown Manhattan space that’s 30 percent smaller.

Deutsche Bank shares were little changed at 11.45 euros as of 9:02 a.m. in Frankfurt. They’ve declined about 28 percent this year, making the lender the second-worst performing stock on the Bloomberg Europe 500 Banks and Financial Services Index.

Read more: Deutsche Bank joins exodus from Wall Street

Deutsche Bank isn’t targeting a specific level of cuts at the U.S. unit and the final figure will depend on each business line’s decisions, according to another person briefed on the matter. The U.S. makes up about a tenth of its global workforce.

The U.S. business is already seeing some senior defections. The bank said in memos Tuesday that Barry Bausano, a longtime senior executive overseeing relations with hedge fund clients, and Jonathan Richman, head of trade and financial supply chain for the Americas, are leaving.

Bausano will step down as chairman of the business with hedge funds and as CEO of Deutsche Bank Securities, the company’s U.S. broker-dealer. The 54-year-old has helped lead efforts to retain big trading clients in recent years, after some grew concerned about the bank’s strength as a counterparty.

Richman, who has spent 10 years at the firm, is pursuing another opportunity and will be replaced by Juan Martin and Giovanni Saladino. The trade business is part of the bank’s global transaction banking unit, which produced 15 percent of its revenue last year.

+++ P.O. (BBG) Deutsche Bank’s Global M&A Head Thomas Piquemal Is Leaving Firm

 P.O.
…One more top executive is leaving Deutsche Bank…

…And i don’t think it will be the last…

…Please be so kind and revisit my Personal Opinions on Deutsche Bank.

Thank You

Francisco

(BBG) Deutsche Bank AG’s top M&A banker is leaving the firm, the latest senior departure to follow a leadership struggle this year.
Thomas Piquemal, also chief country officer for France, is leaving to pursue other interests, according to a Deutsche Bank memo seen by Bloomberg and confirmed by a company spokesman. His M&A responsibilities will be shares by regional heads Robin
Rousseau, Charlie Dupree and Mayooran Elalingam. Piquemal will join Financiere Marc de Lacharriere SA, the French holding company known as Fimalac, the firm said in a statement.
Deutsche Bank said last week that it will scale back U.S. rates sales and trading, reduce the corporate finance business in the U.S. and Asia and review its global equities business with a view toward cutting it back.
The Frankfurt-based lender is reviewing the future of its investment bank, whose future was a key factor in the tumultuous management shakeup that saw Christian Sewing take over as chief executive officer from John Cryan last month.

+++ P.O. (BBG) Deutsche Bank Is Said to Weigh Retrenchment in U.S. Equities

P.O. 

Dear All

Please make some time and revisit my Personal Opinions on Deutsche Bank.

Better safe than sorry.

Saying

Said when you think it is best not to take risks even when it seems boring or difficult to be careful. (Cambridge Dictionary)

Got it?

Francisco (Abouaf) de Curiel Marques Pereira

(Bloomberg) — Barely two weeks into the job, Deutsche Bank AG’s Chief Executive Officer Christian Sewing is considering a retreat that could mark the end of the bank’s two-decade quest to compete with Wall Street.

Sewing is weighing extensive cuts to the lender’s cash equities business in the U.S. and may announce details as part of a wider restructuring of its investment bank when he reports earnings on Thursday, people familiar with the matter told Bloomberg. They asked not to be identified because the details are confidential.

Such a move, if it happens, would effectively signal a sharper focus on the lower-risk business of private and commercial banking in its European home market. Under Sewing’s predecessors, Deutsche Bank built the investment bank into Europe’s largest with ambitions to compete head-to-head with U.S. firms. John Cryan, who started to reverse that push over the past few years, was ousted this month for being to slow to execute a new strategy.

The bank’s supervisory board will discuss the future of the investment bank Wednesday. No final decision has been made, according to the people.

Deutsche Bank’s stock, the second-worst performer among European banks this year, rose 3.0 percent in response to the news to 12.03 euros by 12:15 in Frankfurt Tuesday. Bloomberg first reported the changes under consideration on Monday.

The possible cuts to U.S. equities, where costs outrun revenue even after a bull market stretching back nearly a decade, would be a “first step in the right direction,” said Stefan Mueller, the head of Frankfurt-based finance boutique DGWA. He said the bank has proven it’s “unable to make money in this business no matter what the market circumstances.”

‘Sufficiently Profitable’

According to research by JPMorgan Chase & Co., the Americas equities business had revenue of some 600 million euros ($733 million) last year. Lead analyst Kian Abouhossein estimates that the unit spent five dollars for every four it earned.

In a first memo to staff, Sewing had taken a tough line on costs, saying the bank will pull back from areas where it’s “not sufficiently profitable.” The bank said in its annual report that cash equities revenue was little changed from 2016, without providing figures.

A spokeswoman for Frankfurt-based Deutsche Bank declined to comment.

Cash equities, or the trading of regular stocks, has traditionally been a core business of investment banks, but regulation and technology have made it less profitable in recent years.

“The retrenchment, if it happens, will be a double-edged sword,” said Markus Riesselmann, an analyst with Independent Research, who has a sell recommendation on the stock. “It’s probably too late for Deutsche Bank to regain its competitiveness in U.S. cash equities and other areas of the investment bank. But the decision does raise the question whether Sewing will be able to achieve revenue growth.”

Doubts about future revenue generation are among the strongest arguments against cutting too aggressively. When Standard & Poor’s Ratings Group put Deutsche Bank’s issuer credit rating under review for a downgrade from A- earlier in April, it said that “we consider that a prolonged, deepened, or more costly restructuring would lead the bank to remain a negative outlier for an extended period.”

Revenue Concerns

Dropping into the BBB rating bracket would make the bank’s extensive derivative business more expensive and leave it even more vulnerable to competition from the biggest — and more highly-rated — U.S. banks.

“They’re pretty significant on the institutional side,” said Larry Tabb, founder of market research firm Tabb Group LLC. Still, intense competition among brokers means the bank’s clients will have plenty of other options, he said.

Read more: Deutsche Bank seen lagging U.S. peers in stock trading

Sewing and Garth Ritchie, the head of the investment bank who built his career in cash equities, are currently reviewing all operations of the division, particularly the U.S. operations, according to people familiar with the matter. The review, internally dubbed ‘Project Colombo’, is assessing each unit according to three or four criteria: how profitable it is, whether its products are critical for clients, how much regulatory capital it ties up, and how much investment it would need to be competitive in future.

The cash equities business has suffered from a transition to automated trading and passive investing, both of which have cut the need for human input into day-to-day equities trading. Data compiled by Coalition Development Ltd. Global show that revenue from that business across 12 of the largest firms dropped to a total of $9.2 billion in 2017, the lowest since at least 2006.

What business remains has structurally “moved away from banks,” Cryan said on his last quarterly earnings call with analysts in February.