Deutsche Bank is Germany's biggest bank by a considerable margin, and a major force in continental Europe. However performance in recent years has been disappointing or worse. During the 1990s, DB embarked on an ambitious acquisition spree, snapping up several leading investment banks including US-based Bankers Trust and Morgan Grenfell. By the mid 2000s, this had elevated the group to the upper ranks of the global industry, but it prompted a backlash at home, with accusations that DB was neglecting domestic customers. It attempted to redress that balance by taking control of mass-market German lender Postbank, while also walking the tightrope of the global investment banking crisis. Yet performance remained below-par, Postbank never fitted in, and bad behaviour by investment managers resulted in a string of huge regulatory fines. John Cryan was appointed as CEO in 2015 with a brief to guide the group out of its difficulties. His original plan was to spin off Postbank again and refocus on commercial banking and asset management. However, this strategy was completely revised in early 2017 after two years of huge impairment charges and litigation costs totalling billions, as well as the absence of any willing buyer for Postbank. A massive fine imposed by US regulators in late 2016 caused DB's market value to plunge to its lowest level for decades, and in 2017, the group reported a third consecutive net loss. Cryan was dismissed soon afterwards, and was replaced by retail banking head Christian Sewing. There has been a slow recovery since then. In early 2019, reports began to emerge that the German government was encouraging a merger of Deutsche Bank with local rival Commerzbank to create a single domestic champion to counter competitors from the US and China. Preliminary talks between the two institutions began soon afterwards but these collapsed without agreement after only a few months, raising the possibility that one or both German banks could merge with another European rival. No such deal has materialised. Also in 2019, DB announced a massive scale-back of its investment banking operations, prompting another large loss for the year. Despite the pandemic, revenues rose in 2020 to €24.0bn - the investment banking division saw revenues soar by almost a third, offsetting declines elsewhere - and the bank made profits in each quarter, with a combined total of €624m for the year. Total assets were €1.3 trillion. The surge in performance continued into 2021, despite further regulatory fines and executive departures linked to mis-selling of derivatives. Founded in Berlin in 1870 to fund foreign trade as well as domestic lending and saving, Deutsche Bank was the biggest bank in the world until 1914. It was broken up by the Allies after WWII but gradually reassembled those disaparate pieces, returning to international banking in the 60s, and then global investment banking in the 70s.
Capsule checked 30th September 2021
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Adbrands Daily Update 8th Jul 2019: The axe finally came down at Deutsche Bank after months - years, even - of unsuccessful attempts to turn around performance. The bank announced extensive cuts to its investment banking division, including the closure of all equities trading operations and large reductions in the teams trading bonds and currency. Around 18,000 jobs worldwide - almost 20% of staff - are being eliminated, including several senior positions, and €74bn of assets and trading positions are being transferred to a "bad bank" unit pending sale or write-down. Total costs and impairments associated with the restructure will top €7bn. In essence, the bank will scale back its global footprint to focus on European corporate and retail customers. "What we have announced today is nothing less than a fundamental rebuilding of Deutsche Bank," CEO Christian Sewing told staff, promising that the changes "will bring us closer to our core strength, our DNA." Over the past month or so, DB shares have been trading at their lowest ever levels. In June, the bank's market cap fell below €12bn for the first time, though it has recovered slightly since then.
Adbrands Weekly Update 12th Apr 2018: Troubled lender Deutsche Bank ousted CEO John Cryan following two chaotic weeks of speculation and rumour over his future, resulting from reports that chairman Paul Achleitner had approached other bank leaders for the job. Cryan's replacement is Christian Sewing, previously co-head of the bank's retail division, now DB's 4th CEO in four years. Once a titan of global investment and retail banking, Deutsche Bank has been struggling since 2008 with a succession of woes, including multiple malpractice fines, the gradual collapse of its investment banking business, and a series of abrupt changes of strategy. Cryan's appointment in 2015, in place of two comparatively inexperienced and unpopular joint CEOs, was designed to restore stability to the bank but the past two years have seen even worse performance. Deutsche Bank reported its third consecutive annual loss in 2017 on revenues down 12% to €26.4bn, their lowest level since 2009. DB's shares have more than halved under Cryan's leadership. Yet many analysts believe that chairman Achleitner shares much of the blame for the latest chaos, and are predicting his own dismissal within months. In his first memo to employees this week, new CEO Sewing warned that to recover "we'll have to take tough decisions and execute them." In a clear threat to the troubled investment banking division he warned this would include "pulling back from those areas where we are not sufficiently profitable."
Adbrands Weekly Update 9th Mar 2017: Struggling Deutsche Bank reversed two key strategic decisions announced in 2015 and is seeking to raise €8bn from shareholders to shore up its balance sheet plus another €2bn from selective asset sales. But plans to spin off its mass-market Postbank retail division - the so-called "yellow bank" - have been cancelled for lack of a willing buyer; so has a decision to split its corporate finance and securities trading businesses. DB will, however, seek an external partner for a minority shareholding its asset management division.
Adbrands Weekly Update 5th Jan 2017: The year ended with yet more deals and lawsuits between US regulators and European banks in connection with the mis-selling of mortgage securities in the run-up to the 2008 financial crisis. Deutsche Bank managed to negotiate down a potentially catastrophic $14bn fine to a still-damaging $7.2bn. Of this, $3.1bn will be paid in cash, and the remainder is to be reflected in loan discounts and other forms of financial assistance to US homeowners. At the same time, a separate settlement of $5.2bn was agreed with Credit Suisse, to be split along separate lines between penalty payment and consumer relief. However, no such deal has been reached with Barclays despite months of talks. As a result, the Justice Department has issued a lawsuit against the British bank and two former employees for selling more than $31bn of mortgage-back securities to investors between 2005 and 2007 despite knowing the loans involved had material defects.
Adbrands Weekly Update 22nd Sep 2016: US regulators served Deutsche Bank, Germany's biggest financial services company, with a potentially crippling $14bn fine to settle allegations it mis-sold mortgage securities in the run-up to the 2008 financial crisis. Despite its sizeable balance sheet of €1.6 trillion, Deutsche Bank's market capitalisation has plunged in recent years as a result of multiple problems, and this week slumped to less than €16bn, only slightly more than the value of the fine. In other such situations, banks have been able to negotiate a lower eventual fine. Goldman Sachs, for example, was served with a $15bn fine for the same misdemeanour, but negotiated the final amount down to $5bn. In an act of public defiance regarded by many observers as ill-advised, DB issued a public statement to similar effect, saying it refuses to pay the stated fine but will seek to negotiate a lower sum. This, it is thought, is only likely to encourage US regulators to dig in their heels, especially in the wake of counter-claims by EU regulators against American companies, like the $13bn in back taxes recently claimed by the EU from Apple.
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