Category Archives: Deutsche Bank

(Reuters) Deutsche Bank and Commerzbank go public on merger talks


FRANKFURT (Reuters) – Deutsche Bank and Commerzbank confirmed on Sunday they were in talks about a merger, prompting labor union concerns about possible job losses and questions from analysts about the merits of a combination.FILE PHOTO: Banners of Deutsche Bank and Commerzbank are pictured in front of the German share price index, DAX board, at the stock exchange in Frankfurt, Germany, September 30, 2016. REUTERS/Kai Pfaffenbach/File Photo

Germany’s two largest banks issued short statements following separate meetings of their management boards, a person with knowledge of the matter said, indicating a quickening of pace in the merger process, although both also warned that a deal was far from certain.

“In light of arising opportunities, the management board of Deutsche Bank has decided to review strategic options,” Deutsche said in its statement.

Christian Sewing, Deutsche Bank’s chief executive, told employees that Deutsche still aimed “to remain a global bank with a strong capital markets business… with a global network”.

Sewing said many factors could still prevent a merger and a Deutsche spokesman said the talks were expected to last some time. Commerzbank described the outcome as open.


However, formal disclosure of talks appeared to boost the chances of concluding a deal first floated in 2016 before the banks opted to focus on restructuring.

The German government has pushed for a combination given concerns about the health of Deutsche, which has struggled to generate sustainable profits since the 2008 financial crisis.

The government, which holds a stake of more than 15 percent in Commerzbank following a bailout, wants a national banking champion to support its export-led economy, best known for cars and machine tools.

Berlin also wants to keep Commerzbank’s speciality – the funding of medium-sized companies, the backbone of the economy – in German hands.


A merged bank would likely be the third largest in Europe after HSBC and BNP Paribas, with roughly 1.8 trillion euros ($2.04 trillion) in assets, such as loans and investments, and a market value of about 25 billion euros.

However, sceptics questioned the wisdom of a merger.

“We do not see a national champion here, but a shaky zombie bank that could lead to another billion-euro grave for the German state. Why should we take this risk?” said Gerhard Schick, finance activist and ex-member of the German parliament.

While the banks had not publicly commented on merger talks until Sunday, Finance Minister Olaf Scholz last Monday confirmed that there were negotiations.

On Sunday, the ministry acknowledged the announcement and said it remained in regular contact with all parties.

However, there were signs of political opposition.

Hans Michelbach, a lawmaker from the Christian Social Union (CSU), the Bavarian sister party of Chancellor Angela Merkel’s Christian Democratic Union (CDU), urged the government to sell its 15 percent stake in Commerzbank before a deal.

“There may not be an ownership by the federal government in a merged big bank indirectly through an old stake. We do not need a German State Bank AG,” he told Reuters.

The supervisory boards of both banks are scheduled to hold long-planned meetings on Thursday, four people with knowledge of the matter told Reuters. The status of merger negotiations is expected to be discussed.

A merged bank would have one fifth of the German retail banking market. Together the two banks currently employ 140,000 people worldwide – 91,700 in Deutsche and 49,000 in Commerzbank.

Germany’s Verdi labor union on Sunday renewed its objections to a merger, saying that tens of thousands of jobs were at risk and that a tie-up added no value.

Jan Duscheck, head of the union’s banking division and a member of Deutsche’s supervisory board, said the union would raise its concerns on both banks’ oversight bodies.

U.S. authorities investigate FAA approval of Boeing plane: WSJ


Deutsche emerged unscathed from the financial crash but later lost its footing. German officials fear a recession or big fine could derail the bank’s fragile recovery.

Other than Deutsche, Commerzbank is Germany’s only remaining big publicly-traded bank, after a series of mergers.

Commerzbank has also struggled to rebound, and German officials say it is vulnerable to a foreign takeover. If an international rival snapped it up, that would increase competition for Deutsche on its home turf.

Initial reaction among analysts to a deal was skeptical.

There will only be limited benefits of adding Commerzbank’s clientele of retail and small and medium businesses to Deutsche, said David Hendler, an independent analyst at New York-based Viola Risk Advisors, which specializes in risk management.

“It doesn’t change the fact that Germany is not getting a flagship bank that can compete on the world stage. It’s still a stunted bank with a lot of problems,” Hendler said.

One of the biggest risks is how to fill what one German official has told Reuters will be a multi-billion-euro financial hole because a merger could trigger an adjustment to the valuation of some bank investments.

Commerzbank, for example, has about 30.8 billion euros of debt securities such as Italian bonds that now have a value of 27.7 billion euros. A tie-up could crystallize this loss. Deutsche has such securities at market value in its accounts.

(BBG) Deutsche Bank Is Seeking Merkel’s Nod for Commerzbank Deal


  •  Government will hammer out its position in high-level talks
  •  Chancellor is skeptical that a deal will fix banks’ problems
Angela Merkel
Angela Merkel Photographer: Krisztian Bocsi/Bloomberg

Deutsche Bank AG is seeking political cover from Chancellor Angela Merkel as it tries to move forward a possible merger with Commerzbank AG.

Executives are looking for reassurances they’ll get government backing for potential job cuts as they consider going public with their potential plans, according to people involved in the discussions. While the German Finance Ministry has encouraged the struggling banks to combine, Merkel has stayed on the sidelines so far, the people said, asking not to be identified discussing private deliberations.

The government owns 15 percent of Commerzbank and the chancellor will eventually have to give the deal her green light in order for it to happen.

ECB President Draghi And Financial Leaders At European Banking Congress
Martin Zielke, left, and Christian Sewing.Photographer: Alex Kraus/Bloomberg

Proponents of a deal say the combination would create a stronger German champion that can better compete with rivals but Merkel remains skeptical that a merger would fix the banks’ problems and the chancellor is keen to avoid being drawn into more bank bailouts. With as many as 30,000 jobs under threat, the possible combination of Germany’s two largest listed lenders is also likely to face a public backlash and no one wants to be seen as the instigator.

Despite those reservations, the discussions have continued to move forward. Deutsche Bank Chief Executive Officer Christian Sewing and his counterpart at Commerzbank, Martin Zielke, are increasingly looking at a combination as their best option as their restructuring efforts fail to quickly bear enough fruit, people have said. The Finance Ministry is also concerned that the deal needs to happen now before Germany’s slowing economy makes such a move even more difficult.

Spokespeople for Deutsche Bank, Commerzbank, the Chancellery and Finance Ministry declined to comment.

An announcement of formal merger talks is potentially imminent, the people said, but executives want to dispel doubts over their political cover before moving ahead. The two banks’ supervisory boards are both due to meet next week, separately, and that could be an opportunity to finalize an announcement.

As the banks deliberate the merits of a deal, the government’s position is still being hammered out, the people said. While the Finance Ministry clearly backs the deal, the government’s stance will be decided in talks that also include the Chancellery and Economy Ministry, headed by close Merkel ally Peter Altmaier, they said.

Widespread Resistance

Finance Minister Olaf Scholz is keen to create a national champion for the German banking industry and wants to bolster Deutsche Bank before the economic slowdown starts to bite. Union leaders from Deutsche Bank and Commerzbank have closed ranks in opposition to the potential job losses, warning the risks of a tie-up would outweigh the advantages.

Labor representatives aren’t alone in their criticism. Representatives of two large Deutsche Bank shareholders have expressed doubts about a combination, while financial regulators are also wary, according to people familiar with the discussions.

For the politicians, there’s also the prospect of European parliamentary elections in May, where Scholz’s Social Democrats will be competing with Merkel’s Christian Democrats. With their national coalition already coming under pressure, particularly from Scholz’s rank-and-file, high-profile job losses would make life difficult for both leaders.

In recent days, Scholz himself has steered clear of the issue, dodging questions when asked by lawmakers at closed-door meetings, according to people briefed on the discussions. At another meeting last week, one of Scholz’s deputies waved off the idea that the ministry was pushing a tie-up, the people said.

While executives may want a solid commitment from Berlin, they’re unlikely to get public support from the chancellor and will likely have to make do with whatever reassurances she is prepared to offer in private, some of the people said.

(BBG) Deutsche Bank, Commerzbank Merger Talks Intensify

(BBG) By Steven Arons8 de março de 2019, 07:32 WET Updated on 8 de março de 2019, 16:19 WET

  •  Informal discussions picking up amid government pressure
  •  Deutsche Bank CEO is said to have given up resistance to deal

A merger of Deutsche Bank AG and Commerzbank AG is shaping up as the most likely endgame as Germany’s largest listed lenders are running out of time to show they can grow as standalone companies.

The banks are intensifying informal talks as their turnaround efforts sputter, according to a person familiar with the matter. While there’s no formal mandate to pursue a merger and other options are still being considered, Deutsche Bank Chief Executive Officer Christian Sewing has given up his resistance to doing a deal this year, according to the person, who asked not to be identified in disclosing internal deliberations.

Less than a year after taking over, Sewing is still struggling to reverse a long slide in revenue amid a slowdown in the economy that’s delaying a return to more normal interest rates. The Finance Ministry favors a merger of both lenders before the situation gets worse to support the small and mid-sized companies that are the backbone of the export economy, people familiar with the matter have said.

Deutsche Bank AG's Slump Deepens
Christian SewingPhotographer: Krisztian Bocsi/Bloomberg

Deutsche Bank in February reaffirmed its 2019 profitability target but also made clear that it would need to implement tougher measures if markets don’t play along and revenue continues to decline. January was a terrible month for the trading business though February has seen improving conditions, several people familiar with the matter said.

The bank is now planning to implement tougher cost cuts as one step to ensure it can reach the profitability target, said the people. Other strategic options include a merger with another European bank, though that’s seen as remote. People close to Deutsche Bank’s leadership have floated names like UBS Group AG, BNP Paribas SA and ING Groep NV.

Deutsche Bank dropped 0.8 percent at 5:17 p.m. in Frankfurt trading and Commerzbank fell 1.7 percent. The banks declined to comment on the talks, which were reported earlier by German magazine Focus. The Finance Ministry also declined to comment.

The two companies previously discussed a merger in the summer of 2016 under then-Deutsche Bank CEO John Cryan. Sewing was part of those discussions as head of the retail division at the time. The talks fell apart and the lenders embarked on their respective restructurings.

Abandoning Targets

Almost three years later, those turnaround plans are sputtering. Commerzbank has dropped most of its 2020 financial targets after cutting its revenue outlook. Deutsche Bank, too, has been unable to reverse a long decline in revenue. Both lost more than half of their market value last year.

For Deutsche Bank, the urgency to address the situation is exacerbated by high funding costs and the risk of a credit rating cut. Chairman Paul Achleitner sees an expansion of Deutsche Bank’s retail deposit base — which a Commerzbank deal would bring — as one way to lower funding costs, the people said.

Two credit rating providers — Moody’s Investors Service and Fitch Ratings — have a negative outlook on the lender and see progress on revenue and profitability as key to maintaining their rating.

Finance Minister Olaf Scholz and Joerg Kukies, a former Goldman Sachs banker who serves as his deputy, have been favoring a merger with Commerzbank, people familiar with the matter have said. While a deal is viewed by some as an imperfect solution, some in the government think it will be impossible for Sewing to turn around Deutsche Bank before an economic slowdown exacerbates the situation, Bloomberg has reported.

Prior Talks

The idea back in 2016 was to merge Commerzbank with a subsidiary of Deutsche Bank that would also contain its retail and some of its corporate banking operations, and then float that business on a stock exchange, according to one of the people. Deutsche Bank’s trading operations would have remained separate, perhaps with a view to selling or merging them with another bank at some point.

Deutsche Bank last year laid some groundwork that would make such a split easier, by setting up a largely separated retail and commercial clients operations when it combined its two German retail subsidiaries. The move was aimed at placating regulators’ requirements that the new entity could be separated easily from the rest of Deutsche Bank should it be necessary to wind down the trading operations.

Several of the largest Deutsche Bank shareholders said they would need to see a concrete proposal first before deciding whether they would support it. Two of them said they currently lean toward opposing a merger, while one would back a deal. All spoke on condition of anonymity.

Critics of the Commerzbank option say it would lock Deutsche Bank into several years of restructuring and come with high execution risks, as job cuts are difficult to implement given Germany’s tough labor laws. They also warn that Deutsche Bank’s disappointing track record of technology integration would make it tricky to achieve savings.

Another option under consideration — and currently favored by the two shareholders skeptical of a merger — would see deep cuts to the bank’s U.S. investment banking operations. In this scenario, the bank would redeploy the freed capital in growth areas. That option, however, would erode the bank’s top line even more, at least initially. Sewing has said that the bank will remain in the U.S., with the investment bank a key revenue contributor.

(BBG) Deutsche Bank Weighed Extending Trump Loans on Default Risk


Top Deutsche Bank AG executives were so concerned after the 2016 U.S. election that the Trump Organization might default on about $340 million of loans while Donald Trump was in office that they discussed extending repayment dates until after the end of a potential second term in 2025, according to people with knowledge of the discussions.

Members of the bank’s management board, including then Chief Executive Officer John Cryan, were leery of the public relations disaster they would face if they went after the assets of a sitting president, said the people, who asked for anonymity because the discussions were private. The discussions were about risks to the bank’s reputation and did not relate to any heightened concerns about the creditworthiness of Trump or his company, the people said.

The bank ultimately decided against restructuring the loans to the Trump Organization, which come due in 2023 and 2024, and chose instead not to do any new business with Trump while he is president, one of the people said.

A spokesman for Deutsche Bank declined to comment, and the people with knowledge of the discussions said they didn’t know why the bank ultimately decided not to extend the loans. The White House didn’t respond to requests for comment.

“This story is complete nonsense,” Eric Trump, a son of the president and an executive vice president of the Trump Organization, said in an email. “We are one of the most under-leveraged real estate companies in the country. Virtually all of our assets are owned free and clear, and the very few that do have mortgages are a small fraction relative to the value of the asset. These are traditional loans, no different than any other real estate developer would carry as part of a comparable portfolio.”

Go-To Lender

Deutsche Bank had been Trump’s go-to lender for decades, even as other commercial banks stopped doing business with him because of multiple bankruptcies. Although the German lender’s investment bank had severed ties with Trump during the financial crisis, after he defaulted on a loan and then sued the bank, its wealth management unit continued to extend him credit.

But, as the New York Times first reported, Deutsche Bank had already turned down a request for a loan from the Trump Organization for work on a Scottish golf course in early 2016, during the campaign, in part because of concern that it might have to collect from a sitting president.

The head of the retail bank at the time, which includes the wealth management unit, was Christian Sewing, who replaced Cryan as CEO in April. Sewing initially favored approving the loan application, but he submitted it to Deutsche Bank’s reputational risk committee, which recommended turning it down, according to a person familiar with the matter. Sewing supported the decision, the person said. The Trump Organization said it never sought such a loan.

The outstanding Deutsche Bank debt includes $125 million for the Trump National Doral Miami resort, which matures in 2023, according to federal records and mortgage documents. The company also owes $170 million for the Trump International Hotel in Washington and has another loan against a Chicago tower, both of which come due in 2024.

Read More: Deutsche Bank in Bind Over How to Modify $300 Million Trump Debt

Trump’s dealings with Deutsche Bank are facing heightened scrutiny now that Democrats are in control of the House of Representatives and two party members — Maxine Waters and Adam Schiff — are sitting at the top of powerful committees.

Democrats on the House Intelligence Committee have already described in detail what they want from Deutsche Bank. In a March report, they said they would seek to interview senior executives in the bank’s risk division who could tell them about due diligence conducted on Trump after the 2016 election. They also want documents about the bank’s earlier transactions with Trump and would like to interview his personal banker, Rosemary Vrablic.

In the four years before his election, Trump borrowed more than $620 million from Deutsche Bank and a separate lender, Ladder Capital, to finance projects in Manhattan, Chicago, Washington and a Miami suburb, federal documents and property records show. Jack Weisselberg, a top loan-origination executive at Ladder, is the son of Allen Weisselberg, the Trump Organization’s longtime chief financial officer who previously worked for Donald Trump’s father, Fred. Ladder loaned Trump $282 million for four Manhattan properties, records show. Jack Weisselberg declined to comment.

The loans are split between variable-rate and fixed-rate mortgages. Some are interest-only loans, with balloon payments due at maturity, according to property records and securities filings.

The maturities on Trump’s Deutsche Bank loans haven’t changed since his preelection financial disclosure, filings show. Government-run databases containing local property filings for New York, Washington, Chicago and Miami-Dade County don’t show any changes in the terms of Trump’s mortgages.

(BBG) Deutsche Bank Sees Merger by Mid-Year If All Else Fails


  •  Executives are said to worry bank is running out of time
  •  CEO Christian Sewing has pleaded for patience with his plan

Deutsche Bank AG executives are worried that they’re down to the last 60 days to turn around their struggling franchise.

On the eve of fourth-quarter results that are likely to reflect its troubles, the bank’s ability to avoid a government-brokered merger with Commerzbank AG could rest on its performance in the first quarter of 2019, according to people briefed on the thinking of its top executives.

A spokesman for Deutsche Bank declined to comment.

“If this is true, the economic situation at Deutsche Bank must be worse than seen by the outside,” said Andreas Plaesier, an analyst with M.M. Warburg. “A merger with Commerzbank at this point doesn’t make sense because it offers few possibilities to achieve client growth.”

Chief Executive Officer Christian Sewing has pleaded for patience with his current plan, which is centered on cost cuts and efforts to stabilize market share, but dramatic images of a police raid in November have compounded the impact of a challenging market. That’s threatening to undermine a return to growth after several failed turnaround attempts. The German government has been intensifying efforts to help fix Deutsche Bank, studying ways to make it easier to merge it with Commerzbank in a bid to add scale and slash expenses.

Although the bank’s largest investors continue to support Sewing, they’re unhappy with the losses they’ve sustained, according to people familiar with the matter. The stock lost more than half of its value last year, before recovering some of those declines this year.

Deutsche Bank CEO Sewing Accelerates Lender's Turnaround Effort
Christian SewingPhotographer: Alex Kraus/Bloomberg

Deutsche Bank fell 3.5 percent at 12:12 p.m. in Frankfurt trading, reversing earlier gains. Commerzbank declined 3.7 percent.

The cost of insuring debt sold by both Deutsche Bank and Commerzbank fell to the lowest levels since November.

While a deal is viewed by some as an imperfect solution, the German government thinks it will be impossible for Sewing to turn around Deutsche Bank before a potential economic slowdown exacerbates the situation, people familiar with the government’s thinking said. Berlin on Wednesday slashed its economic growth forecast for this year to just 1 percent, which would be the weakest pace in six years.

The Finance Ministry declined to comment.

The country still owns a large stake in Commerzbank after a bailout. It doesn’t own a stake in Deutsche Bank, but Finance Minister Olaf Scholz has said repeatedly that he wants strong international banks to support Germany’s export-oriented companies.

Talks between the lender and the government have recently intensified. Representatives of Germany’s largest bank had 23 discussions with officials in Berlin since the new government was formed in March, most of them with Deputy Finance Minister Jorg Kukies. Sewing and supervisory board Chairman Paul Achleitner each had six exchanges, according to a Finance Ministry letter seen by Bloomberg.

Doubling Down

Sewing has ruled out any mergers before 2020, but he’s also said in private that he will have to change his strategy before that if his plan fails. Many officials at Deutsche Bank and the German government favor a merger with Commerzbank as the best option available to Sewing, people familiar with the matter have said.

Analysts polled by the bank now anticipate an eighth consecutive decline in group revenue for the fourth quarter. Chief Financial Officer James von Moltke recently told Bloomberg News that December was a difficult month for the bank.

Still, at least one large shareholder appears ready to double down on the company. Deutsche Bank won a commitment for new investment from Qatar, which already has two vehicles with stakes in the lender, people familiar with the matter have told Bloomberg. The new investment is likely to be made through the the country’s sovereign wealth fund.

(ZH) Fed Probing Deutsche Bank’s Role In Largest-Ever Money Laundering Scandal


As rumors about a possible Deutsche Bank merger with rival troubled German lender Commerzbank continue to swirl despite the seemingly never-ending investigations into a suite of alleged misdeeds by the bank, Bloomberg has given would be merger arbs weighing whether to buy the German lender’s battered shares one more reason to hold off.


In a follow-up to a report late last year that the Department of Justice had expanded its probe into what could be the largest money laundering scandal in history – that is, the infamous Danske Bank money laundering scandal, which involved some $230 billion of suspicious money flowing into Western Europe from shadowy sources in the former Soviet Union – by looking into the role played by the various correspondent banks that cleared many of these transactions (a group that included DB, BofA and JPM), Bloomberg reported on Wednesday that the Federal Reserve is examining how DB moved billions of dollars on behalf of Danske’s Estonian branch, the epicenter of the fraud.


Though this line of inquiry is said to be in its early stages, the implications are clear: US regulators are growing increasingly dissatisfied with correspondent banks and their deference on all KYC-related issues to the client banks whose transactions they are clearing.

Deutsche Bank said that month it has controls in place when acting as a correspondent for other banks, but its ability to know about their clients is limited. As a correspondent, “your only relationship is with the bank and the bank itself has the responsibility to check its own client to monitor the transaction and to do all these kinds of checks”, a company representative said at the time.

The Fed is exploring whether Deutsche “adequately monitored funds” moving through Danske’s Estonian branch.

The Fed’s probe is in an early stage as it scrutinizes whether Deutsche Bank’s U.S. operations adequately monitored funds from an Estonian branch of Danske Bank A/S, according to two people briefed on the situation, who asked not to be named because the inquiry isn’t public. Danske, which used correspondent banks such as Deutsche Bank to move money abroad, has admitted that much of about $230 billion that flowed through the tiny Estonian outpost may have been dirty.

For what it’s worth, DB denied that the Fed or other US regulators or law enforcement agencies were investigating the bank. Instead, it said they were merely asking questions.

“There are no probes,” Deutsche Bank said in an emailed statement, but the bank “received several requests for information from regulators and law enforcement agencies around the world. It is not surprising at all that the investigating authorities and banks themselves have an interest in the Danske case and the lessons to be learned from it. Deutsche Bank continues to provide information to and cooperate with the investigating agencies.”

The Fed is supposed to ensure that banks in its jurisdiction properly scrutinize their clients. One factor that may have attracted scrutiny from the Fed was testimony from a Danske whistleblower who told lawmakers in Denmark that DB moved $150 billion – the bulk of the suspected illicit cash – on behalf of Danske.

The U.S. requires banks operating under its jurisdiction to scrutinize clients and their dealings to detect potential money laundering and alert authorities to suspicious transactions. The Fed is among regulators that ensure banks have adequate systems in place to fulfill those duties.

A Danske Bank whistle-blower who outlined the illicit flow of cash through that firm has said much of it passed through Deutsche Bank in the U.S., and one of the people said the Fed is focusing on the German lender’s trust bank. Deutsche Bank has been cooperating with the Fed, the people said.

A Fed spokesman said it doesn’t publicly discuss confidential probes.

Last week, DB CEO Christian Sewing said he had launched an internal probe into the bank’s correspondent banking practices even though he hasn’t seen anything to suggest wrongdoing. Much of the illicit activity under investigation took place between 2007 and 2015.

The bank had previously reviewed its actions in the case, Sewing said at an event in Berlin. He urged people not to “prejudge” the bank or its employees, presuming their innocence unless proven guilty.

Whether the Fed probe results in financial penalties remains to be seen. But banks and investors should take note: Correspondent banks, who have previously been allowed to feign ignorance when their involvement in money laundering violations has come to light, might soon be facing a lot more scrutiny.

(Barron’s) Deutsche Bank Deal Talks Bubble Up Again


Deutsche Bank headquarters in Frankfurt are shown late last year.

Deutsche Bank headquarters in Frankfurt are shown late last year. Photograph by Thomas Lohnes/Getty ImagesText size

This story never seems to end: Talks about a possible merger betweenDeutsche Bank (DB), the biggest German lender, and its smaller domestic rival Commerzbank (CBK.Germany) are on again.

According to Handelsblatt, German officials have taken a keen interest in the possible combination of late, as shown by the fact that Deutsche executives and German government officials met no less than 23 times last year. As always, the question about this long-mooted merger is two-fold: Why? And why now?

The answer to both is harder today because the story has shifted of late. It started a couple of years ago as a quest for a possible acquirer of the 16% stake in Commerzbank held by the German government. These days, it looks more like an attempt at a Deutsche Bank rescue.

Neither bank immediately responded to a request for comment.

Commerzbank benefited from a large-scale German government bailout in 2008 and 2009. Over the years, Spain’s Santander (SAN.Spain), France’sSociété Générale (GLE.France), and BNP Paribas (BNP.France), Italy’sUnicredit (UCG.Italy) or Swiss UBS (UBS) were mentioned alongside Deutsche Bank as potential buyers of the resulting government stake.

Berlin, however, never hid its preference for the potential creation of a private national champion in a country with a large but challenged public banking sector.

Germany’s problem now is less to find an acquirer for the Commerzbank stake than to take care of Deutsche Bank. After a string of bad business news in the last year, the bank, humbled by its rapid expansion into investment banking abroad, is now the target of a major money-laundering and tax-evasion probe.

The CEO appointed last year, Christian Sewing, is in the middle of a turnaround plan he says is beginning to bear fruit. But the group has lost money three years in a row and is trading at less than a fourth of its book value. Even though it can hope for better market conditions for its investment-banking business in the months to come, a merger with Commerzbank, from the German government’s viewpoint, would help avoid a takeover by a foreign competitor.

According to Handelsblatt, the European Central Bank, which supervises the eurozone’s largest banks, would instead favour a combination with another European lender. Meanwhile rumors of a combination with UBS are resurfacing, although the respective size of the two banks (UBS’s market capitalization is nearly three times that of Deutsche.) would make it more an outright, humbling acquisition by the Swiss group than a merger. In any case UBS chairman Axel Weber, who once headed the German central bank, earlier this year said it would “make little sense to consider mergers now” since “they paralyse companies for years.”

It’s easy to see how a strictly German deal would appeal to the government, which is eager to shore up the country’s somewhat archaic banking sector. It may notably help paper over the €3 billion-plus loss a government so keen on fiscal rectitude would have to take on its Commerzbank stake at current market prices.

And German plans may be favored by the fact that potential European buyers are currently busy enough with their own problems. SocGen this week issued a warning on its investment-banking revenue, Unicredit’s own turnaround is challenged by financial markets’ concerns about the Italian government’s economic policies, and Santander is still looking for a chief executive.

That leaves BNP Paribas, which makes no mystery of its ambition to expand in the German retail market and become a player as a lender to the many small and medium-size companies that form the Mittelstand, the backbone of Europe’s strongest economy. It probably wouldn’t be interested in Deutsche Bank’s troubled investment bank, but may consider taking over the Postal service’s banking operation, which Deutsche acquired ten years ago.

Whatever the end game, Deutsche boss Sewing is likely to keep insisting that it wouldn’t make sense to enter serious merger or acquisition talks before he has a chance to prove his strategy right. Meanwhile don’t expect the rumors to end anytime soon.

(ZH) Deutsche Bank To Spend About $2 Billion On Bonuses, Despite “Cuts”


Distressed Deutsche Bank plans on cutting the company’s bonus pool by about 10% this year as the bank struggles to stay afloat, while at the same time trying to retain employees, according to a new Bloomberg report.

Bonuses are going to be paid more selectively in an attempt to keep the people that earn the most for the bank, according to the report. The bank awarded about €2.2 billion in bonuses ($2.5B USD) for 2017, meaning that the company could still be spending ~€2 billion on bonuses this year, even after the targeted 10% cut. The bank’s CEO, Christian Sewing, is said to be trying to “keep a lid” on costs.

Tim Zuehlke, managing partner at Frankfurt-based executive search firm FRED, stated: 

“Deutsche Bank has a severe talent loss problem and this bonus cut will exacerbate the problem. Focusing on top performers is not new and not the solution.”

The bank’s stock has been slaughtered over the last year and the share price is currently less than half of where it needs to be for retention awards that have already been issued to employees to vest. This is causing some top performers at the bank to consider leaving, while frustrating others.

Since Sewing has taken over, top talent like Tadhg Flood, co-head of Deutsche Bank’s global team of bankers advising financial-services clients and Charlie Dupree, its top M&A dealmaker in the Americas, have already left the company.

The bank’s revenue for 2018 is slated to be the lowest since the 2008 financial crisis and the article notes that the bank’s fourth quarter was “negatively affected by police raids on the lender’s headquarters in November”. Meanwhile, the bank’s CFO, James von Moltke, used the all-to-vague and perfunctory “weak market environment” excuse for the decline in revenues. 

The bank’s new CEO has already announced his intention to cut 7,000 employees by the end of this year and the bank said it has already cut 1,000 front office jobs in the second and third quarter of 2018.

(Barrons) Why It’s Time to Bail Out of Deutsche Bank


Deutsche Bank headquarters in Frankfurt.
Deutsche Bank headquarters in Frankfurt. Photograph by Thomas Lohnes/Getty Images

There’s not much to love about Deutsche Bank . The German banking giant is mired in legal woes, the stock is expensive, and a restructuring will dog its performance for some time. Deutsche Bank shares have the potential to fall 30% on top of already-brutal declines. “We fail to see an improvement in the underlying business,” said a recent Morningstar report. Third-quarter results “were underwhelming,” and while layoffs and a restructuring are “well under way…most of the work still lies ahead.”

Deutsche Bank (ticker: DBK.Germany) shares have taken a beating, shedding more than half of their value over the 12 months through Dec. 6. Contrast that with a 8.1% loss of theFinancial Select Sector SPDR exchange-traded fund (XLF), which tracks a basket of bank stocks, over the same period.

Part of the problem is a toxic cloud of scandals. Earlier this week, German authorities settled with the bank over questionable tax deals, and in late November six offices in Frankfurt were raided over allegations of money laundering, a charge that has cost the bank dearly over the past few years. “[R]aids that take place with reasonable frequency in Germany aren’t that well understood outside of Germany,” said the bank’s CFO, James von Moltke, in a TV interview. “Our focus is obviously on cooperating with the prosecutors making sure that we satisfy their requests and hopefully putting the investigation fully behind us.” Deutsche Bank declined to comment further.

Still, that doesn’t make Deutsche Bank stock a buy—and investors should consider dumping it in any forthcoming rallies. Or alternatively, purchase out-of-the-money put options that will pay out if the stock falls.

Deutsche Bank is pricey. Its forward price/earnings ratio is 16.7 versus an average of 13.1 over the past five years, according to Morningstar data. Just across the English Channel, the similarly sized United Kingdom–basedLloyds Banking Group (LLOY.UK) trades at a forward P/E of 7.6, down from 10.5 in 2016. In other words, Deutsche Bank is a lot more expensive than Lloyds, even if you don’t consider performance. Deutsche lost money in the past three calendar years, while Lloyds has been consistently profitable since 2014.

If Deutsche Bank shares traded at the same P/E as Lloyds, then it would be worth $6.24 versus the current $8.89. That price level is slightly higher than that produced with technical analysis. “A 5-handle is not out of the question,” writes J.C. Parets, founder of AllStarCharts and a technical analyst. A 5-handle means that the stock would be worth from $5 to $5.99.

The bank’s prospects look uncertain. “We expect DB’s top line to be negatively impacted by revenue attrition from its decision to downsize the business in recent years,” noted a December report from research firm CFRA. “The European Central Bank’s decision to delay an interest-rate hike into the later part of 2019 will also hurt its interest margin.” In other words, the bank’s profit-making ability is hampered by low borrowing costs.

“If the company can’t make money when there are no setbacks and financial crises, then tell me how it survives the next recession,” says Don Coxe, chairman of Chicago-based financial firm Coxe Advisors.

There are risks of dumping the stock. The scandals may blow over, the restructuring may go better than expected, and the stock may rally. A Bundesbank official recently told Bloomberg: “Experience since the financial crisis has shown that even large institutions are capable of resolutely changing tack. But this takes time.”

(ZH) Deutsche Bank Cleared Nearly All Of $234 Billion In ‘Suspicious’ Funds For Danske Bank

(ZHDeutsche Bank shares have continued to break through successive all-time lows following news that Frankfurt prosecutors are pursuing charges against DB employees (and possibly the bank itself) over allegations that the bank’s wealth management unit helped launder money for criminals and other tax cheats – allegations that surfaced in the infamous ‘Panama Papers’ leak from 2016. Meanwhile, a parallel scandal has been brewing over DB’s involvement in the Danske Bank money laundering scandal – one of the biggest in European banking history.

Last month, the Danske whistleblower who helped lead regulators to the endemic processing of ‘suspicious’ money flowing out of Russia, Moldova and into Western capitals suggested that Deutsche Bank helped clear $150 billion of the $234 billion deemed suspicious by a Danske internal audit (some clients of Danske’s Estonian branch are believed to have had ties to Russian President Vladimir Putin) . And on Thursday, press reports added another $35 billion to that figure. According to the Financial Times, which cited an internal DB memo, Deutsche cleared a total of nearly $200 billion for Danske’s Estonian branch between 2007 and 2015. This means that Deutsche Bank cleared more than 4/5ths of the purportedly suspicious funds flowing out of the Danish bank’s Estonian branch. Over the eight year period, DB processed some 1 million transactions, according to the memo, and never once bothered to question the provenance of these massive sums of money, which dwarfed the annual GDP of Estonia.

This revelation follows reports that regulators in the US and Europe are looking into Deutsche Bank’s role in the scandal. A Deutsche spokesman said the bank is cooperating with all inquiries. Howard Wilkinson, the former Danske executive-turned-whistleblower,told the Danish Parliament last month that Deutsche cleared roughly $150 billion through a US-based subsidiary.

Deutsche stopped clearing money for Danske’s Estonian branch in 2015, two years after JP Morgan dropped Danske Estonia as a client, after complaining that its compliance department had flagged too many examples of suspected money laundering. But the memo obtained by the FT revealed that even as DB stepped away from dollar clearing, it continued to process payments denominated in euros, totaling some 225 million euros ($256 million) between 2015 and 2018 (though Deutsche’s membership in the Single Euro Payments Area means that it was obliged to process these payments).

This means that Deutsche could face further legal penalties related to three separate scandals: The infamous Russian mirror-trading scandal (Deutsche paid more than $600 million in fines to US and UK authorities last year but US authorities are continuing their investigation), the ‘Panama Papers’ AML violations and the Danske scandal.

Despite these mounting legal risks, Deutsche affirmed on Thursday that it would not raise its provisions for legal judgments,likely leaving the bank vulnerable to more fines (Deutsche has already paid some $18 billion in fines since the financial crisis), which could seriously impact future earnings.

P.O. (FT) Deutsche Bank needs a bold and swift restructuring


I am afraid, and as i wrote dozens of times, here is no hope whatsoever for Deutsche Bank.

Just take a look to the thousands of cases, (that we know of…), that might have a significant impact in the balance sheet…

No way José, again in my opinion.

Francisco (Abouaf) de Curiel Marques Pereira

(FTDeutsche Bank needs a bold and swift restructuring

(ZH) Bill Black: Deutsche Bank Crimes Could Trigger Next Global Crisis

(ZH) The International Monetary Fund (IMF) previously deemed Deutsche Bank as the most systemically dangerous bank in the world.

Professor of Economics and Law, William Black, knows why and contends:

“Deutsche Bank (DB) poses as what is called a ‘National Champion’ bank and the largest bank by far in Germany, but it’s actually the largest criminal enterprise in Germany. This is quite a statement because VW is such a massive fraud…

It is insane that we allow Deutsche Bank to go from fraud to fraud to fraud…

They cheat on everything else you can possibly imagine and, typically, they are getting caught, which is also not a very good sign in terms of their competence even as thieves. Even in the United States, there has been reluctance to crack down on Deutsche Bank…

When the New York Commissioner tried to crack down, the Office of the Comptroller of the Currency, the premier banking regulator, actually sought to impede that. He disparaged the New York folks and said there really wasn’t that big of problems and such, and all of that proved to be lies.”

Deutsche Bank was raided by German regulators last week on more allegations of fraud and money laundering.

DB is the epitome of “Too Big To Fail.”

So, it will never be allowed to fail, and regulators will not be allowed to regulate them properly. Professor Black says, “Why you should care is Deutsche Bank impedes effective regulation everywhere and because God only knows the next thing they are going to do…”

“This is going to continue until something dramatic changes. Eventually, they can cause the next crisis…

There will be a bailout in these circumstances, but that could help trigger another economic crisis. When the largest bank in the third largest economy in the world is completely dysfunctional, then the German economy is more likely to go into recession as well. That is one of the potential sources of the next recession, and you can see lots of people warning that there are signs that a serious recession is pretty likely relatively soon. Relatively could be two years.”

Professor Black, who was a top regulator in the S&L crisis, says,

“The whole system weakens itself because it gets caught in this big lie that says we have to pretend that Deutsche Bank is a bank instead of a criminal enterprise.”

In closing, Professor Black says,

I am going to give you the advice you get after the recession before the recession. Pay off your debt, all that you can. Do not keep borrowing except in certain circumstances like you are going to buy a home, and it is prudent purchase. Buy a car when you can buy it with cash whenever possible…and always try to be a net saver.”

Join Greg Hunter as he goes One-on-One with Dr. William Black, Professor of Economics and Law at University of Missouri Kansas City.

(Correction: Deutsche Bank has a market cap of $19.5 billion and not $1.5 billion as I mistakenly said at the beginning of the interview. Also, Germany’s GDP fell .2% recently and not 2% as I stated later in the interview.)

(BBC) Deutsche Bank headquarters raided over money laundering


Police cars outside Deutsche Bank officesImage copyrightREUTERS

The Frankfurt headquarters of Deutsche Bank have been raided by prosecutors in a money laundering investigation.

Germany’s public prosecutor alleged that two staff members have helped clients launder money from criminal activities.

Police cars were seen outside the tower blocks that house the headquarters of Germany’s biggest bank.

Other Deutsche offices in the city were searched in an operation involving about 170 police and officials.

Prosecutors are looking into whether Deutsche Bank staff helped clients set up off-shore accounts to “transfer money from criminal activities”.

The investigation was sparked by revelations in the 2016 “Panama Papers” – an enormous amount of information leaked from one of the world’s most secretive companies, a Panamanian law firm called Mossack Fonseca.

Other banks, including Sweden’s Nordea and Germany’s Handelsbanken have been fined as a result of information contained in the Panama Papers.

Deutsche Bank shares fell 3% after news of the raid emerged. The company confirmed that police had raided several locations in Germany and that it was co-operating fully with the probe.

Paperwork and electronic documents were seized by officials during the raids on the bank’s properties.


(EUobserver) Deutsche Bank dragged into Danish bank scandal


  • Deutsche Bank: “We terminated this relationship … after identifying suspicious activity”. (Photo: Reuters)

Deutsche Bank, Germany’s top lender, handled about €130bn of the “suspicious” money in the Danske Bank affair – the biggest money-laundering scandal in EU history.

“Deutsche Bank acted as correspondent bank for Danske Bank in Estonia. Our role was to process payments for Danske Bank. We terminated this relationship in 2015 after identifying suspicious activity by its clients,” the German lender told press on Tuesday (20 November).

  • Danske Bank is Denmark’s top lender, holding assets worth 140 percent of the country’s GDP (Photo:

A “correspondent bank” acts as an intermediary for other banks in countries where they do little business.

In this case, that meant Deutsche Bank helped Danske Bank’s clients in Estonia to move money into the US financial system.

Those clients were intimates of Russian president Vladimir Putin, Russian intelligence services, Russian mobsters, and members of the Azerbaijani elite, according to findings in Denmark.

Hundreds of millions of the funds were also ‘blood money’ linked to the murder of Russian anti-corruption activist Sergei Magnitsky, Magnitsky’s former employer, Bill Browder, has said.

The Deutsche Bank revelation comes after a Danske Bank whistleblower, Howard Wilkinson, testified to Danish MPs on Monday.

“I would estimate that $150bn [€130bn] has flowed through this particular bank”, Wilkinson said.

He named the bank only as a “US subsidiary of a European bank” and a “major correspondence bank handing US dollar transactions” because a Danske Bank gag order forbade him from saying more.

He said two US banks were also involved, with the Reuters news agency, citing sources, saying that these were JP Morgan and Bank of America.

“Nobody really knows where this money went, all we know is that the last people who saw it were people from those three banks in the US. They were the last control, and when it went awry was the money in the global financial system,” Wilkinson said.

“There’s no chance in the world that any of the suspicious money … will ever be traced or that any of those criminals will ever lose a single cent of it,” he added, given that it has already taken years for the scandal to come out.

Showdown in parliament

The fresh revelations set the scene for Wilkinson’s second testimony, due in the European Parliament on Wednesday.

The acting CEO of Danske Bank, Jesper Nielsen, will also take part, with MEPs, such as Danish centre-left deputy Jeppe Kofod, set to urge him to tear up the non-disclosure agreement that his bank forced Wilkinson to sign under threats of financial penalties.

The German and US banks all terminated their business with Danske Bank between 2013 and 2015, but the dodgy funds had flowed through their accounts for more than five years before they washed their hands.

The news saw Deutsche Bank’s shares fall a further three percent on Tuesday amid concern that German and US regulators might impose fines.

Deutsche Bank already paid €550m in fines to British and US regulators in 2017 for having funnelling about €9bn of illicit Russian money.

The scandal, which was itself the biggest in EU history before the Danish affair, saw Bafin, the German regulator, install a “special representative” in Deutsche Bank to oversee anti-money laundering compliance in an unprecedented step.

The US Department of Justice is still investigating the €9bn case in a process that could see the German lender pay out further penalties.

The Danish affair has prompted the European Commission to table new anti-money laundering laws to help clean up the European banking system.

More to come?

But if Danske Bank lifts its gag order on Wilkinson it could lead to further revelations of how small EU countries with large offshore banking sectors act as a conduit for dirty money into the EU and US financial system.

Its Estonian branch aside, there was a “deafening silence” on what Danske Bank’s Lithuanian branch has been doing, Wilkinson said on Monday.

Cyprus, Malta, and Latvia are also weak links in the EU’s anti-money laundering chain, Panicos Demetriades, Cyprus’ former central bank chief, previously told EUobserver.

The “political pressure” on bank supervisors in these countries was “so great that it’s very hard for them to do the right thing,” he said.

Banks in Cyprus handled €3.4 trillion of cross-border transactions including by non-resident or offshore clients between 2008 and 2015, according to European Central Bank (ECB) data obtained by the Bloomberg news agency in October.

Latvian banks handled €2.8 trillion and Estonian ones €900bn, the ECB said, indicating that the Dankse Bank and Deutsche Bank scandals could be just the tip of the iceberg.

(ZH) Deutsche Bank, Again?

(ZH) Whenever we see markets tanking as they have been for the past few days with the Dow down almost 1,000 points (3.7 percent) since Friday’s close, we think counterparty risk may be spooking traders and investors.   We suspect, and we could be wrong, there is a growing concern over Deutsche Bank’s (DB) stock making new all-time lows.

We see a lot of hits on our blog today on our past posts about Deutsche Bank.

Biggest Globally Systemically-Important Bank (GSIB)

Deutsche Bank, which has been labeled by the IMF as the biggest contributor to global systemic risk,  hit a new all-time low in Frankfurt this morning, closing at around €8.17,  down over 91 percent from its pre-GFC high and almost 50 percent year-to-date.  The latest hit comes from its involvement with Danske Bank, who is wrapped up in a money laundering scandal in Estonia.

Whenever a GSIB stock is making a new low,  it’s time to sit up, stand up and listen.

No Lehman

Deutsche is no Lehman Brothers. The Germans will never let its flagship fail and neither would world policymakers.


The bank is not dependent on wholesale funding from the markets and finances itself mainly through a large deposit base.  The DB chart below illustrates its 77 percent deposit-to-loan ratio.

Also see the IMF chart on the bank’s horrendous return-on-equity, which many believe is the reason why the stock is tanking and not over balance sheet concerns.

Nevertheless, DB has, the last time we looked, the world’s largest derivatives book, and as the stock goes lower the risk of spooking its counterparties moves higher.   The German government and EU regulators must be cognizant of these risks,  not dilly-dally,  and show firm resolve to the markets

The lower the stock goes the higher the probability the German government will be called upon for a capital injection.  Deutsche Bank will not be allowed to fail as the world will end as we know it.

German Sovereign CDS

DB’s credit default swaps have risen from 120.7 bps in September to 155.7 bps, but have not yet taken out the May 188 bps high, however.

Deutsche Bank is relatively big.  It’s total assets are equivalent to about 47 percent of German GDP, which compares to JP Morgan,  the largest U.S. bank,  and though larger than DB is asset size, is only around 12 percent of GDP.   The large bank to GDP size throughout Europe is a reflection the continent is way overbanked.

Buying German sovereign 5-year credit default swap protection at 13 basis points seems like a good, cheap, positive asymmetric bet on DB event risk to us.   If the Merkel government is called upon to bail out DB, the sovereign’s CDS rates move higher, in our opinion.   The cost of being wrong is a few basis points of carry over the next few months.

No peep from the talking heads today about DB, folks, so this definitely has the potential to hit the market by surprise. Keep it on your radar.

(ZH) Whistleblower Implicates Deutsche Bank In $150 Billion Money Laundering Scandal

(ZH) Just when Deutsche Bank probably thought the worst of its legal troubles (over the Libor scandal, sales of shoddy mortgage-backed securities, FX and precious metal rigging which collective resulted in tens of billions in legal fines) were behind it, the struggling German lender is being drawn deeper into the biggest money laundering scandal in European history.

Following reports over the weekend that Deutsche, JPM and Bank of America had been approached by federal investigators about their correspondent banking business’s involvement in clearing transactions for Danske Bank’s Estonian branch, the whistleblower who helped blow the lid off Danske’s $234 billion money laundering scandal said during testimony to the Danish Parliament that $150 billion of the money had been cleared by a large European lender, stopping short of naming Deutsche, likely to respect confidentiality rules governing the whistleblower’s work at Danske. Incidentally, as Bloomberg adds citing a “person familiar”, the unnamed bank is Deutsche Bank.

Deutsche continued to clear transactions for Danske’s Estonia branch until 2015, two years after JPM had ended its correspondent banking relationship with Danske’s Estonia branch over AML concerns. The suspicious funds flowed through Danske between 2007 and 2015 before Denmark’s largest lender closed its non-resident portfolio over AML concerns.


In an internal audit released earlier this year, Danske admitted that most of the $234 billion in non-resident cash came from suspicious sources in Russia, Azerbaijan and Moldova. With the help of its dollar-clearing correspondent banks, Danske converted the rubles and other foreign currency into dollars and moved it into the Western financial system. Roughly $8 billion of the money was converted via legal-though-shady “Mirror Trades”, where a client buys and sells a security in two different currencies, typically to help launder their money into dollars and euros (in a strange but sadly unsurprising coincidence, Deutsche’s Moscow desk got caught up in a mirror trading scandal of its own a couple years back).

Howard Wilkinson, the former Danske employee-turned-whistleblower, claimed that some of the money flowed through a London-based trading firm called Lantana Trade, which is rumored to have ties to the family of Russian President Vladimir Putin and members of the FSB. Wilkinson is expected to testify before both the Danish and EU parliaments this week, and will also be speaking with US investigators, according to the Financial TimesIn addition to the DOJ and SEC, FinCEN has said it is actively interested in the Danske case.

Wilkinson, who first warned Danske’s directors in Copenhagen about suspicious activity in Estonia back in 2013 and 2014, also alluded to a “large US bank,” which the Financial Times identified as JPM.

Mr. Wilkinson also hit out at “large US bank 1” — known to be JPMorgan Chase — which stopped its correspondent banking relationship with Danske in 2013 over concerns about the non-resident portfolio in Estonia at the heart of the scandal which ran from 2007 until 2015. “It takes them seven years,” he said, of how long it took them to end their relationship with Danske.

In the past, correspondent banks involved in money laundering scandals similar to Danske’s have been treated as unwitting dupes by prosecutors. But the aggressive steps being taken by US prosecutors (regulators in Denmark, London, Estonia and the EU are also looking into the scandal) suggest that this could be the beginning of a crackdown that could fundamentally change how large international banks manage AML controls on their correspondent banking business.

That, in turn, could create serious problems for Baltic banks, which might find themselves effectively cut off from the broader global financial system, even if they take the necessary steps to tighten their AML controls. According to meeting minutes first reported by the FT, Danske directors acknowledged the suspicious activity in Estonia, but by April 2014, Wilkinson said it had become clear that the bank wasn’t planning to act. Indeed, former Danske CEO Thomas Borgen, who had previously run the bank’s international business, had reportedly taken steps to protect the Estonian branch, which Danske took over during its acquisition of Finnish Sampo Bank.

We’ll give you one guess as to why:


(ZH) Deutsche Bank Shares Tumble After Net Income Plunges 65% On Lowest Revenue In 8 Years

(ZH) There was some good, but mostly bad news in Deutsche Bank’s Q3 earnings report.

The good news is that after years of turmoil, the biggest German bank is showing signs of stabilization under new CEO Christian Sewing after a bitter boardroom battle. The bad news is that the bank missed across all key revenue metrics as Sewing scrambles with a looming problem: how to boost revenue after firing thousands of banks in a multi-year long cost-cutting campaign.

The German bank reported net income of €229 million on Wednesday, above the €160 million expected but 65% below the €649 million reported a year ago. Profit before tax also tumbled by nearly half, dropping from €933 million to €506 million.

Investors were closely watching the bank’s costs: the new management team, which was appointed last April, promised to deliver further cost-cutting to revamp the balance sheet. In the third quarter of 2018, the bank said that adjusted costs dropped 1% from a year ago to 5.5 billion euros, with the aim for the full year to bring adjusted costs down to €23 billion and €22 billion in 2019. A core part of the new “restructuring” effort have been mass layoffs as the number of workers is set to come down to 93,000 by the end of 2018, and 90,000 one year later.

But while costs and the bottom line beat were a modest positive surprise, the same could not be said for the bank’s revenue which disappointed across the board: total revenue of €6.17BN missed expectations of €6.34BN and guided lower, now predicting a slight decline for full year revenue after earlier guiding for a flat result; trading income in the key FICC division tumbled 15% from a year earlier, while equities trading, a sector where Wall Street banks generally posted gains, also dropped at the same pace as these two key businesses have been hardest-hit by executives departures recently.

More Q3 revenue details:

  • FICC revenue: €1.32BN vs €1.545BN in Q3 2017, and missing expectations of €1.365BN
  • Equities trading revenue: €466BN vs €548BN in Q3 2017, and missing expectations of  Exp. €473BN
  • Total sales and trading revenue: €1.79BN, missing expectations of €1.84BN
  • Total revenue: €6.17BN, missing expectations of €6.34BN

In total, Deutsche reported its lowest third-quarter revenue since 2010 and now expects a slight decline for the full year, after earlier guiding for a flat result according to Bloomberg.

The silver lining is that while revenue was a disappointment, costs also shrank which should allow the bank to post its first annual profit in four years according to Sewing who added that the focus now has to be on growing the top line without compromising controls: “With profit before tax of 506 million euros, this result is another milestone on our way to becoming a sustainably profitable bank. We have our costs under control and sufficient capital to grow. We are on track to be profitable in 2018, for the first time since 2014.”

Of course, being profitable by butting into the muscle is hardly what shareholders expected, and the CEO admitted as much writing in a memo to employees that while “we made headway on our cost reductions,” he admitted that “we have not yet achieved a turnaround in terms of revenues.

As Bloomberg notes, for investors who have been through the bank’s previous turnaround plans, “it’s a familiar pattern.” John Cryan, Sewing’s predecessor, had vowed to restore “controlled growth” last year after raising fresh funding, but failed to deliver. Sure enough, the stock was promptly punished for this latest disappointment, with Deutsche Bank shares falling 3.5%, having lost 44% of its value this year and trades near its record low.

Sellside reactions were mixed, with JPM analyst Kian Abouhossein writing that Deutsche Bank “has done an excellent job under Sewing” on cost reductions and improving the bank’s capital strength, however “we remain concerned about DB’s inability to turn around” the investment bank division.”

On the other hand, Goldman analyst Jernej Omahen was more critical, writing that the third quarter results were “weak” from an operational perspective, noting underperformance relative to U.S. peers in investment bank revenue progression, as well as the underlying pretax profit miss. The silver lining: capital was better-then-expected, as was bottom line, due to lower burden of non-operating items.

But the one recurring theme was the lack of top-line growth: “Costs are in line with targets,” said Daniel Regli, an analyst with MainFirst who has a hold recommendation on the stock. “But there is continued weakness in investment bank revenue. That needs to be fixed.”

* * *

Sewing had staked his restructuring effort, and Deutsche’s fourth in three years, on boosting profitability by trimming costs and refocusing on fewer, core activities. Yet the continued contraction in the top line risks undermining investor confidence in the strategy and may fuel speculation that the lender needs to combine with a rival in the long run, BBG adds.

The new CEO has vowed the investment banks will remain a core business for Deutsche Bank, with at least half of the revenue coming from the unit. And yet, he’s cutting at least 7,000 jobs and retrenching in areas such as prime finance, U.S. rates and corporate finance in the U.S. and Asia. The bank cut another 700 positions in the third quarter after eliminating about 1,700 jobs in the three months through June; it said it remains on track to hit its job target of well below 90,000 by end of 2019.

The bank’s steady exodus of employees has left the business stuck in what CFO James von Moltke called a “vicious circle” of declining revenue, “sticky” expenses, a lowered credit rating and rising funding costs. Additionally, the bank on Wednesday highlighted higher funding costs and geopolitical events among the headwinds for the securities unit.

Meanwhile, as the one-time financial titan continues to shrink, all management can do is try to boost morale: Garth Ritchie, head of the bank’s securities unit urged employees in a memo to “focus resolutely on rebuilding revenue momentum” in the final quarter; surely a preferable alternative to being fired. Von Moltke said on a conference call that the bank wants to redeploy excess cash to return to growth, as restructuring expenses are likely to be lower than previously expected. He said rating companies would be comfortable with such use of capital.

“We need to end the year on a strong note,” Sewing wrote in his memo. “We’ll stay disciplined on costs, and we’ll turn around revenues.”