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Deutsche Bank has no plan B

While Commerzbank might yet be an attractive partner in European consolidation, Deutsche is caught in a horrible cycle of continuing to cut costs to offset declining revenues.


Christian Sewing, CEO of Deutsche Bank

The day after ending merger talks with Commerzbank, Christian Sewing, chief executive of Deutsche Bank, put on his bravest face to announce a 9% decline in revenues during the first quarter of 2019 compared with the same period last year.

Sewing says that the bank made three promises to shareholders in 2018 and has delivered on all of them: to lower costs, to manage its balance sheet conservatively and to make good progress improving its controls.

“We have begun to pivot towards controlled growth,” he says.

It is a sign of just how low expectations have been set for this bank that senior management should even attempt to spin a quarter in which it just about met them as a vindication.

Their job is to manage the balance sheet conservatively. With CDS spreads now back up to 170 basis points, Deutsche’s higher funding costs are a competitive disadvantage to US and European peers in pricing new business. It claims to have seen some modest market share gains recently, but these come in shrinking revenue pools.

Taken together, revenues across equities and FIC sales and trading and origination and advisory ­– in other words, classically defined investment banking – fell 16% in what Sewing described as a “very, very difficult and challenging first quarter”.

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