Deutsche Bank shares turn negative

[JustJohn or JJ]

Deutsche Bank shares turn negative as lender gets ready for major overhaul
Published 5 hours ago  Updated 44 min ago
Elliot Smith
@elliotsmithcnbc

Points

Deutsche Bank’s mass restructure will see 18,000 jobs cut by 2022 and the closure of its global equities sales and trading business in a bid to improve profitability.

The bank expects the sweeping reforms, which also involve the creation of a 74 billion euro ($83.05 billion) “bad bank,” to cost 7.4 billion euros by 2022.

Deutsche Bank shares turned negative after initially jumping nearly 4% in early morning trade on Monday as the German lender announced a mass restructuring program over the weekend. In one of its boldest overhauls, the bank will see 18,000 jobs cut by 2022 and the closure of its global equities sales and trading business in a bid to improve profitability.

The bank expects the sweeping reforms, which also involve the creation of a 74 billion euro ($83.05 billion) “bad bank,” to cost 7.4 billion euros by 2022. With second-quarter results due on July 25, Deutsche is expected to report a net loss of 2.8 billion euros.

Deutsche Bank Chief Financial Officer James von Moltke told CNBC’s Annette Weisbach on Sunday that this will be the last strategy overhaul, aiming to reduce global headcount to around 74,000 and cut adjusted costs by a quarter to 17 billion euros.

Several sources have told CNBC that layoffs at the bank’s offices in New York begin on Monday.

The German bank’s decision to scale back on investment banking comes just two days after its investment banking chief Garth Ritchie stepped down by “mutual agreement.”

Deutsche shares have risen 16% over the past month, bouncing off an all-time low in early June after CEO Christian Sewing called for “tough cutbacks” at a contentious shareholder meeting. However, the multiyear decline is evident in a share price at Friday’s close of 7 euros, as opposed to 112 euros at their pre-crisis peak.

The tumbling share price has reflected the bank’s long run of legacy scandals, many of which relate to anti-money-laundering failures, along with the collapse of merger talks with domestic rival Commerzbank, which may have eased pressure to trim or hive off its investment banking arm.
About time

Stephen Isaacs, chairman of the investment committee at Alvine Capital Management, told CNBC’s “Squawk Box Europe” on Monday that it was “about time” Deutsche Bank took action to improve profitability.

“Every other European bank, I’m afraid to say, has had to face up to the reality that they can’t compete with the Wall Street players — go UBS, Credit Suisse and even the British banks. Come on, guys, it is extraordinary that it has taken this long, and only in the case of a complete collapse in the share price, and starting to see some of their key clients moving away,” Isaacs said.

Isaacs said that while eventually the reforms will work for Deutsche Bank, they will be “far more painful” and the “provisions that they’ve talked about are not nearly adequate.”

“All sorts of issues are going to crawl out of the woodwork, I’m afraid. Getting rid of all those jobs is very expensive, particularly in Europe, particularly in Germany, it’s going to be very difficult,” he said.

“Ultimately, the strategy of effectively doubling down on the German corporate market, just at a time when maybe the German economy is really rolling over, that in itself is not a key to profitability.”

Isaacs went as far as to suggest that embattled chairman Paul Achleitner, who survived an attempt to oust him at a contentious shareholder meeting in May, should resign over the crisis.

www.cnbc.com/2019/07/08/deutsche-bank-shares-jump-4percent-as-lender-gets-ready-for-major-overhaul.html

[JustJohn or JJ]

Investigations surrounding Deutsche Bank's more than decade-long relationship with President Donald Trump and his business have created a crisis for the German financial giant.

It's caught in a legal tug of war between Trump and House Democrats for the president's financial records and calls for broad investigations of its anti-money laundering practices.

But for the 150-year old bank, Trump is just the beginning of its problems.

Once a global powerhouse, catering to the U.S. elite from a tower on Wall Street, Deutsche Bank's fortunes have waned. Sunday, it announced a major restructuring, including ending its global equities business and reducing its investment bank operations.

The restructuring reportedly will mean a reduction of 18,000 jobs by 2022. The news followed an announcement Friday that Deutsche Bank's investment banking chief, Garth Ritchie, was stepping down by mutual agreement.

Shareholders are growing increasingly frustrated by the bank's lackluster profits and growing legal bills. The bank's stock dipped to record lows in recent months, though it has rebounded some recently.

At its annual meeting in Frankfurt, shareholders quizzed company executives for more than nine hours over a series of missteps that have kept the bank under pressure.

"I'm leading a bank that is undoubtedly going through a challenging period," said Deutsche Bank CEO Christian Sewing, who has been at the bank for more than 20 years and became chief executive in 2018. "I want to bring back the pride people feel in working for Deutsche Bank. This is crucial for motivation." Deutsche was prepared to make "tough cutbacks," he told shareholders.

The bank reported a profit for the first time since 2014 last year, but shareholders are still not satisfied.

Deutsche "used to be the biggest lender in Germany," said Firdaus Ibrahim, a CFRA equity analyst. Its "relevance has been declining over the years."

The various investigations into Deutsche and its relationship with Trump have made the bank's efforts to bounce back more complex, analysts say.

It is currently caught a legal battle over a subpoena from House Democrats years of the president's financial records. A Manhattan federal judge has rejected a request by Trump and his family to block Deutsche and Capital One from complying with the congressional subpoenas. The case is currently on hold while Trump appeals the decision and the banks have agreed not to turn over any information until the case is resolved.

Seven Democrats on the Senate Banking Committee have also the Federal Reserve to probe whistleblower allegations, first reported by the New York Times last month, that Deutsche Bank buried suspicious activity from accounts associated with Trump and his son-in-law and senior White House adviser Jared Kushner.

New York Attorney General Leticia James has also subpoenaed records from Deutsche Bank related to three large loans the bank extended to Trump's company in recent years.

The "Democrats' maneuvers will be a cloud over Deutsche for the foreseeable future," said said Ian Katz, a policy analyst at Capital Alpha Partners.

The bank has said it will cooperate with all of the investigations and has begun discussing the best way to turn over the documents covered by the subpoena with members of the House committee staff, according to a person familiar with the discussions. Bank executives have indicated they are wary of appearing to resist any of the U.S. investigations, said the person, who sought anonymity because they were not authorized to speak publicly.

All of the investigations are a "negative," said Ibrahim of CFRA, adding that it "reaffirms what the market has been concerned about the bank's legal risk."

It comes at a time when Deutsche is also struggling to put years of legal troubles are behind it. In 2016, it agreed to a $7.2 billion settlement for a mortgage-abuse case with the U.S. Justice Department and in 2018 agreed to pay $240 million to settle accusations it conspired with other banks to manipulate a key interest rate.

But the pressure has intensified. Earlier this month it acknowledged that it used faulty software to detect suspicious customer transactions and in November, more than 100 German officers raided its Frankfurt headquarters as part of a money-laundering investigation. The search "hit TV screen across the world and ... severely damaged us," said Sewing, the chief executive.

It is also at the center of one of the largest money-laundering cases in history involving Danske, Denmark's largest bank. Authorities are investigating $233 billion in suspicious transactions moving through the bank's tiny branch in Estonia - nearly 10 times larger than that country's gross domestic product. Deutsche Bank helped transfer funds on behalf of Danske, which has said it has improved its internal systems to fight financial crime.

Deutsche Bank has said it is cooperating with all investigations and not been told it violated any laws with its relationship with Danske.

"We believe it is time for shareholders to hold (Deutsche) accountable for the many years of substantial monetary and reputational costs to the bank borne by shareholders," Institutional Shareholder Services, a proxy advisory firm, said in a note recommending that shareholders issue a vote of no confidence to the bank's board. The board ultimately survived the vote.

Most pressing to many shareholders is the bank's continuing struggle to rebound from the financial crisis. The European economy recovered more slowly than the United States after the financial crisis and so did its banks. But Deutsche's recovery has been particularly slow, analysts say.

It reported a profit of $341 million last year compared with a loss of $735 million in 2017, but that is still disappointed investors. The bank considered a merger with its German rival Commerzbank earlier this year, but was plunged into more uncertainty after that deal fell through.

Deutsche's "indecisiveness has been one of the main reasons why the market has been so skeptical of its turnaround plan," said Ibrahim of CFRA. " Since the financial crisis, the bank has seen numerous changes of management and strategy, none of which have been successfully executed."

In the United States, where Deutsche has about 10 percent of its 91,000 employees, the bank is also facing a challenges with its U.S. regulators. It has repeatedly failed an annual stress test proving that its U.S. operations could sustain itself during another global financial crisis without wrecking havoc on the economy.

"The crisis heightened the realization than non-U.S. large financial intuitions like Deutsche were even more fragile, had even less capital than was true of major U.S. banks," said Larry White, a professor at NYU Stern School of Business. "Deutsche may well be too big to fail, too big to manage effectively."

[Jaga]

John, that's for finding a good info about the Deutsche bank. I have heard on and off about some of these isssues, but only today I read about so many people losing their jobs in Deutsche bank. I hope that they would have to release some info about Trump. I also hope that getting clean aboutbutkbwould improve the bank,s credibility.