After three years of loss, Deutsche Bank is finally black again. And since May 2018 the institute also has a new peak. But does the bank manage to reverse the trend?
By Sandra Scheuring, HR
For the German bank chief Christian Sewing there were more unpleasant appointments. Tomorrow he will announce his payout at the annual press conference, the first time since 2014. A small profit is expected, but the bank is far from over the mountain. The year 2018 was bad and the prospects are modest at best. If the sewing does not make the turn, Deutsche Bank threatens the merger or the branding.
From one scandal to the next problem
With sewing, a new board has been in charge since May 2018. Even if he is very familiar, it is a race against time for him. The costs are high, the yield falls and the bank is struggling with digitization and, like all low-yield banks.
A two-day crackdown in November about suspected money laundering was the low point. Blue light poles for the Twin Towers – while Sewing finally wanted to get the bank out of the headlines. Instead, there is some doubt as to whether Deutsche Bank is able to control the risks. The American authorities are intensively engaged in drilling for the costs of money laundering in connection with Danske Bank. One has the impression: as soon as a scandal is over, the following difficulties arise.
Save costs and growth at the same time
The problematic situation can clearly be read from the course. He goes to a permanent low level. In the course of the year 2018 he went from just under 16 euros to about eight years Euro halved. Sewing should show how the bank can save costs, but can grow at the same time. A challenge that market participants do not necessarily trust. The confidence of investors is tense. They had to participate in capital increases, despite the red numbers, there were billions of bonuses.
The very weak market value of around 16 billion euros is an alarm signal. Deutsche Bank has become small on the stock market, the connection with US banks was missed a long time ago. For example, Citigroup or JP Morgan have earned more money in 2018 than Deutsche Bank is worth.
Worse status than European competitors
How does the bank want to make money again? After three years of loss in a row, investors and analysts are not clear about it. The collapsing return is the biggest concern. Especially in the payment system, an important pillar of the bank, observers expect significant decreases, as well as for the company with bonds.
To earn a euro, Deutsche Bank has to spend 93 cents. That can not last long. Other major European banks are much cheaper in comparison (UBS 82%, Santander 47%).
Deutsche Bank has been reporting for years that it wants to save costs, but is still lagging behind European competitors, says Rainer Haselmann, professor at the Goethe University in Frankfurt. This shows that the strategy chosen by the management was not successful. In short, the bank will continue as before and is not in a position to focus strategically on more profitable business, Haselmann explains.
Merger with Commerzbank?
A merger with the German bank number two, the Commerzbank, has been speculating for years. Reportedly, the federal government must agree to the merger with the partially nationalized Commerzbank. It is not necessarily a success story to bring together two shaky banks. "In plain language this means a significant reduction of staff and branches, but cost synergies alone are too weak The German economy needs a large bank, but not necessarily a German bank." This is the thinking of yesterday, "Jan Pieter Krahnen, director of the SAFE research center at the Goethe University in Frankfurt, criticized the merger plans, and it would make more sense to have cross-border associations with European institutions.
The problem here: due to the low market value of Deutsche Bank, the role of a junior partner, for example, should come on the side of UBS. From an economic point of view this can be logical, it would no longer be politically enforceable. Financial expert Haselmann warns: "But if every country asks for a" national champion "then we have 25" national champions "on the banking market, but for so many banks the question is the European market too small. & # 39;
Precisely because Deutsche Bank is so uncertain, a merger is unlikely in the coming months. Sewing time and again emphasizes that the bank first has to be profitable. It is not a reassuring finding.