The mood seemed exuberant last week on the New York Stock Exchange. In any case, Deutsche Bank boss Christian Sewing apparently swung the gavel so lively on the bell, which traditionally ends trading on the New York Stock Exchange (NYSE), that it made his fellow board members happy. Chairman of the Supervisory Board Paul Achleitner, who also traveled with the NYSE on the occasion of the bank’s 20th anniversary, posted the photo on the LinkedIn career network, where he has recently been sharing his point of view, as have some of the other greats in the German economy. “A powerful moment” was the performance, wrote Achleitner, who will hand over his office next May after ten years, and a strong symbol for Deutsche Bank’s anchoring in the US economy.
His announcement earned him applause from colleagues who praised the “milestone” in the history of Deutsche Bank. Achleitner did not mention that the bank’s excursion to Wall Street, which began in 1999 with the takeover of the US investment bank Bankers Trust, ultimately burned billions in shareholder money, i.e. Summa Summarum was anything but powerful. For the in-house investment bankers, who usually got bonuses even when business wasn’t going so smoothly, it was still worth it after all.
Things didn’t go quite as smoothly on Wednesday either, at least on the stock market after Deutsche Bank published its quarterly figures. In the past three months, the bank has earned almost 200 million euros, around seven percent more than in the same quarter of the previous year. So it was the fifth consecutive quarter with a profit. The bottom line, however, was that this only corresponded to a return on equity of 1.5 percent, which is far from the eight percent that CEO Christian Sewing is aiming for in 2022. At the same time, the banker seems to be more lax with the costs.
Stable numbers, weak shares
In any case, the bank’s share fell by more than six percent to around 11.10 euros. The shares had risen in the past few months, but not nearly as strongly as the shares of other large banks. In particular, the large investment houses such as Goldman Sachs or JP Morgan are currently profiting massively from the post-corona recovery of the economy, cheap central bank money and government aid worth billions for the real economy.
For Deutsche Bank, however, the boom in investment banking seems to be slowing down, which is mainly due to the concentration on fluctuating trading in bonds after giving up the equity business. “The bank has so far not managed to become more independent of volatile investment banking,” says Benjardin Gärtner, head of shares at the Union Investment fund company. This will not change in the current interest rate environment. The competitors are better diversified with regard to their earnings drivers.
If you believe the management, then there is no reason to doubt that the bank will be able to successfully complete the renovation in 2022, which was announced in July 2019. All divisions developed as planned or better, claims Sewing at every opportunity – which is only true if you take into account the numerous Changes to the plan thinks along. In any case, Deutsche Bank is far from being a well-behaved entrepreneur bank with strong roots in its home market, but continues to be an investment bank that generates part of its income in exotic and risky markets. And one in which powerful bankers in New York, London or elsewhere continue to rule.
To find the money house’s biggest source of income, you have to travel thousands of kilometers by plane from Frankfurt to Southeast Asia, according to the news agency Bloomberg has researched. You will find it on the 18th floor of an office tower with a view of Marina Bay in Singapore. There, Chetankumar Shah, a banker in his early 50s, heads a team that looks after complex financings. The spectrum of customers ranged from Asian tycoons to European producers of renewable energy. Papers from an Indonesian conglomerate are just as much a part of the business as junk titles from an Israeli shipping company. Few people in Frankfurt may know Shah. In the bank’s accounting, it does: Its global financing and Credit trading group generate revenues of an estimated three billion euros annually, about a third of investment banking. So everything is OK? If the markets turned, it could show what risks were lurking there, so the conclusion of Bloomberg.