Deutsche Bank drops Wall Street ambition to focus on Europe

Desiree Steele
April 27, 2018

Revenue at Deutsche Bank in the first quarter of 2018 fell by 5% year on year to EUR7 billion, mainly because of reduced trading in shares, borrowing and currencies.

The new CEO appointed at Deutsche Bank, Christian Sewing note that the bank will shift from hedge fund investment and concentrate on steadying few strong areas of the bank. "There is no time to lose as the current returns for our shareholders are unacceptable".

James von Moltke, chief financial officer at Deutsche Bank, says USA operations will be shrinking. He was a proponent of expanding Deutsche's investment bank to compete globally with United States rivals, which have largely taken market share from European banks since the financial crisis.

"Deutsche Bank is deeply rooted in Europe - here we want to provide our clients access to global financing and treasury solutions".

Several analysts have released their opinion on Deutsche Bank Aktiengesellschaft (NYSE:DB), with 0 analysts believing it is a strong buy.

The bank said it is pulling back in certain trading and lending activities that don't make enough money to justify costs and risks, especially in the US and Asia.

Although radical, Sewing's actions are broadly in line with what was expected from a CEO who was most recently head of private and commercial banking, and whose previous leadership positions were in risk management and audit. The bank will be undertaking a review of its Global Equities business with the expectation of reducing its platform. It joined the ranks of global securities firms with the 1989 purchase of British merchant bank Morgan Grenfell and a decade later purchased Bankers Trust, a NY derivatives house. The company has a market capitalization of $29,472.18, a PE ratio of -24.63 and a beta of 1.44.

Paul Achleitner, now Deutsche Bank's supervisory board chairman, advised it on the purchase while at Goldman Sachs Group Inc. Deutsche Bank presently has a consensus rating of Hold and an average price target of $17.41.

For the past months, Deutsche Bank had been reviewing the securities unit again to weed out unprofitable parts where it can no longer compete with its bigger USA rivals. The lender had begun to retreat from some businesses under Cryan, who, in the year 2015, said that he would close operations in 10 countries, cut 10 percent of jobs, and decrease the number of investment bank clients by around half.

Investors have been calling for such moves amid signs that Deutsche Bank's strategy was failing. "The end of its global investment banking ambitions with cuts in the US and Asia is welcome". "This is what we will focus on more decisively going forward", Sewing said. It increased its estimate for restructuring expenses to 800 million euros this year, up from an earlier estimate of 500 million euros, Chief Financial Officer James von Moltke said.

Other reports by

Discuss This Article