Tag: deutsche bank

It was Inevitable…

As I speculated previously, Deutsche Bank is going to be firing a bunch at 60 Wall any moment. Per Bloomberg:

“Deutsche Bank AG is abandoning its ambitions to be a top global securities firm as it embarks on possibly the most sweeping overhaul yet of its struggling investment bank.“

Sheeeeesh. I suppose this is for the best, though, take a look at these highlights:

  • 1Q net revenue EU6.98 billion, down 5%; analyst estimate EU7.27 billion
  • 1Q sales and trading revenue EU2.45 billion, down 17% while U.S. counterparts rose 12%
  • 1Q net income attributable to shareholders EU120 million

Look at that last one! Ladies and gentlemen, €120M is NOT a lot of money.

Sewing knew coming into his new job that this had to be a “rip the band-aid off” type of restructuring and I commend him for wasting no time in getting down to business. They mentioned on the call that there would be a “significant reduction” in headcount this year, and they’re targeting U.S. rates S&T,  U.S. corporate finance and the coup de grâce, global cash equities trading. If you don’t make markets in rates and equities or advise companies on raising capital in the U.S., are you even really an investment bank? Maybe in practice you retain some IB capabilities, but people won’t be doing business with you in an IB capacity – which is fine. Sewing’s job, first and foremost,  is to make money, and he’s going to do it the only way he knows – traditional commercial and retail banking, with a sprinkle of asset management. So good luck to Sewing, and even more best wishes to all of the DB employees updating their resumes right now. Don’t cry because it’s over, smile because it happened.

The Deutsche Bank Difference

“Bloomberg – Deutsche Bank Inadvertently Made a $35 Billion Payment in a Single Transaction“

Look, it’s 5:00pm on a Thursday – I want to go home, open up a nice old world red. Something to get the pallet dancing while I watch some playoff hoops. Complex tannins, high acidity, but nothing too extravagant. A nice every day wine, a workhorse wine if you will – Produttori del Barbaresco, perhaps.

But all that is on hold until I stick it to John Cryan one more time. As soon as I saw this headline come across, I absolutely knew that this wasn’t a recent event, that they buried this thing and, now that Cryan is gone, somebody spilled the beans. Turns out, they did this before Easter and by my quick calcs that falls under our boy’s tenure. Some back office kid in Germany was tasked with wiring the variation margin that day to their clearinghouse, Eurex. That’s it, just send some money to a different account. A simple task for most, but when you’re DB, you manage to bungle the easiest of things.

Now, I don’t want to get on this lowly analyst too much. I understand fat fingers happen – that’s why there’s industry jargon for it. But when you’re wiring cash in excess of the bank’s entire market cap, I know for a fact that there are multiple channels that have to sign off on releasing a wire instruction that large (I started out in ops, don’t lie to me). So unless I’m missing something, at least two people decided to send $35B to their clearing house that day – and that, my friends, is what we call the Deutsche Bank difference.

P.S. – that wine link isn’t even an ad. That’s just, in my opinion, one of the better, reasonably priced, old world’s you can find. Do yourself a favor.

Cryan Out; Sewing In; Retail Banking En Vogue.

“CNBC – Deutsche Bank tapped Christian Sewing to be its new chief executive, the bank announced on Sunday, confirming widespread speculation that John Cryan would be replaced.”

So, a quick update on our friend, John Cryan. As I wrote a little over a week ago, there was no doubt that he would be asked to take a long walk off a short pier once shareholders started putting calls in directly to the Board. So while that was a foregone conclusion, what wasn’t as clear was who would succeed him. Last night we got our answer in the 47 year old Deutsche Bank lifer, Christian Sewing. If you thought banking in Frankfurt couldn’t become even more boring, you’d be wrong, as Sewing is currently DB’s retail banking CEO and has a background in risk management and audit. It seems like the Board is set on simplifying DB’s complex operations and returning it to a more traditional banking model, which doesn’t bode well for any of our friends at 60 Wall Street.

While Cryan stunk at his job, Christian Sewing isn’t going to swoop in and save DB from its mistakes overnight. He’ll likely look to begin a longer term process of shedding some of the bank’s “flashier” assets / businesses, taking a deep dive into the bank’s book of business and assessing how to prepare for a future focused on retail and commercial banking – which will inevitably result in further dings to DB’s reputation and prestige in the marketplace. It hasn’t been a fun few years to be a DB employee and it doesn’t seem like it’ll be better any time soon.

You Cryan, Boy?!

“Reuters – Large investors in Deutsche Bank have urged its chairman to provide a clear signal on whether the board backs the lender’s embattled chief executive or not…“

Dead man walking. John Cryan is inevitably out as CEO of Deutsche Bank, and the announcement will come sooner rather than later. He was appointed CEO in 2015 after their board gave Anshu Jain his walking papers. So now, after a few years of unlimited brats and kraut, it looks like this native Briton is back to bangers and mash.

You hate to see someone get embarrassed on the public stage like this, but you also hate to hire someone who sucks at their job. Cryan was unable to maximize shareholder value, which is like, prerequisite #1 for being CEO of a bank. It is worth noting however, that he didn’t inherit a perfectly healthy institution, either – but he knew what the job entailed and came out of the gates with an ambitious restructuring plan called “Strategy 2020”. The whole thing was predicated upon firing a few thousand employees, raising come capital and reducing costs. Pretty standard stuff.

His real problems started in Q3 2016, when the U.S. government levied a $14B (eventually settled for $7.2B) penalty on the bank related to the marketing of crisis-era RMBS. In response to the financial crisis, European banks were required to raise capital to buffer themselves against a future crisis, and they used Contingent Convertibles (CoCos) to do it. These securities are designed to be wiped out first in the event of a credit crisis, forcing creditors to bail-in the banks vs. having central banks bail them out. Once news of the U.S. fine hit, DB CoCos got pummeled because markets knew they couldn’t pay up based on their cap structure at the time. Long story short, this whole mess wiped billions in market cap off the Company and forced it to raise $8B in equity a few months later – at a 35% discount (sheesh)!

Fast forward to today and the Company hasn’t turned a profit in THREE YEARS. Imagine that, a bank not being able to turn a profit in 2017. You gotta fire this guy, and I’m surprised it took so long. The ironic part is that he knew DB had to raise that $8B to save the bank, and the same guys he sold the equity to are making calls directly to the board to fire his ass. Tough look, John. Tough look, indeed. So let’s raise a glass to John Cryan, because at the end of the day, he no longer needs to live in Frankfurt – and that my friends, is a victory in and of itself.

Leveraged Burnout: Welcome

After years of staring into the anachronous (yet oddly satisfying) abyss that is a Bloomberg terminal, “v-ing up the model” and sifting through more management presentations than Intralinks, I’ve decided my brain can use a good ol’ fashioned creative reboot. Enter: Leveraged Burnout; my own satirical takes on an industry that, while I hold it dearly to my heart, has almost completed its transformation into a parody of itself – financial services.

Truth is, I wouldn’t have to do this if Dealbreaker would get their heads out of their asses and put out some quality content. That said, as noted extortion victim and all around good guy Rick Pitino once said: “Bess Levin and Matt Levine are not walkin’ through that door.” So we’ll do it. Together. While covering topics that truly matter, like if 2018 is finally the year that Deutsche Bank or Bill Ackman remember how to turn a profit.

I’m not sure how this whole thing will play out (nor will I care until it generates some ad rev), but we’ll see what happens. Maybe it grows and some more writers come aboard, maybe I’m not actually funny or knowledgeable enough to keep an audience. All I know is, I’m excited.

P.S. – speaking of Deutsche Bank, it looks like one of the longest running memes on the internet found out it was long some Tesla paper.

’til next time.