Is Deutsche Bank drinking in the last chance saloon?
As it presses ahead with restructuring, Deutsche will exit cash equities, cut back in rates and centre itself on a traditional corporate banking business. CEO Christian Sewing calls it the most radical transformation the bank has undertaken in decades.
This article appeared in the August 2019 print edition of Euromoney and incorporates two earlier articles: "Sewing’s savings: how Deutsche Bank will try to turn itself around" on July 8, and "Deutsche Bank reports big loss from accelerating restructuring charges" on July 24
Deutsche Bank reported a heavy net loss for the second quarter of 2019 of €3.1 billion, after taking €3.4 billion of charges for the transformation it first announced on July 7, which will see it exit secondary equities and scale back in rates.
“We have already taken significant steps to implement our strategy to transform Deutsche Bank. These are reflected in our results,” says chief executive Christian Sewing. “A substantial part of our restructuring costs is already digested in the second quarter. Excluding transformation charges, the bank would be profitable. In our more stable businesses, revenues were flat or growing.”
Clearly, the bank is attempting to front load as much of the expense as it can in 2019 to give it a chance of reporting a token profit next year. It had said it might take €2.8 billion of charges in the second quarter but has moved ahead of this target by refining valuation adjustments and goodwill impairment calculations.