X

This is not a paywall.

Register for free to continue reading.

The news sucks. But your reading experience doesn't have to. Help us improve that for you by registering for free.



Please create a password or click to receive a login link.


Please enter your password or get a login link if you’ve forgotten


Open Sesame! Thanks for registering.

First Thing, Daily Maverick's flagship newsletter

Join the 230 000 South Africans who read First Thing newsletter.

We'd like our readers to start paying for Daily Maverick

More specifically, we'd like those who can afford to pay to start paying. What it comes down to is whether or not you value Daily Maverick. Think of us in terms of your daily cappuccino from your favourite coffee shop. It costs around R35. That’s R1,050 per month on frothy milk. Don’t get us wrong, we’re almost exclusively fuelled by coffee. BUT maybe R200 of that R1,050 could go to the journalism that’s fighting for the country?

We don’t dictate how much we’d like our readers to contribute. After all, how much you value our work is subjective (and frankly, every amount helps). At R200, you get it back in Uber Eats and ride vouchers every month, but that’s just a suggestion. A little less than a week’s worth of cappuccinos.

We can't survive on hope and our own determination. Our country is going to be considerably worse off if we don’t have a strong, sustainable news media. If you’re rejigging your budgets, and it comes to choosing between frothy milk and Daily Maverick, we hope you might reconsider that cappuccino.

We need your help. And we’re not ashamed to ask for it.

Our mission is to Defend Truth. Join Maverick Insider.

Support Daily Maverick→
Payment options

Doubts over Deutsche Bank turnaround plan shake shares

Business Maverick

Business Maverick

Doubts over Deutsche Bank turnaround plan shake shares

By Tim Cohen
10 Jul 2019 0

 Deutsche Bank shares extended losses on Tuesday on investor doubts that its chief executive can revive the lender by shrinking the investment bank and returning to its roots as banker to corporate Germany.

By 1312 GMT, shares were down 3.8% on the day, after sliding as much as 6.5% earlier. The bank’s bonds also fell.

Analysts and investors say Sewing, who joined Deutsche Bank in 1989, is right to cut back its trading desks but question if he can make his plan work when interest rates are still low and U.S. banks have expanded their share of the German market.

“There seem to be some concerns about the plan details, particularly the ability for the bank to retain revenues while cutting costs,” one of the bank’s top 25 shareholders told Reuters, citing worries the bank would need fresh equity to execute Sewing’s plan.

Analysts with RBC Capital Markets wrote that the bank’s outlook for revenue growth was “ambitious” and there was a high degree of risk associated with implementing the plan.

Ratings agency Fitch, which last month downgraded the bank to “BBB” status, the lowest investment-grade, echoed this.

“Cutting back volatile, capital-intensive and underperforming sales and trading activities, and further reducing the cost base should improve profitability and strengthen leverage, but execution risks are high,” it said.

JOB CUTS

Deutsche plans to return closer to its roots by focusing on corporate banking and asset and wealth management, areas that can offer more stable revenues than investment banking but are increasingly competitive.

The bank began cutting jobs in its trading business on Monday, with staff laid off in offices stretching from Sydney to New York.

Sewing, promising to make a break with a past of Deutsche’s “over-promising and under-delivering”, told analysts on Monday that his plan was a “real game changer”.

Douglas Braunstein, who holds a 3.1% share in Deutsche through his New York-based Hudson Executive Capital, said it would take a while for the market to appreciate what Deutsche Bank is doing.

“Going back to basics for this 150-year old company is ultimately going to be a very successful strategic decision,” he said on CNBC.

However, Deutsche Bank’s capital instruments took a further hit on Tuesday, with a US dollar Additional Tier 1 (AT1) perpetual instrument callable in Nov 2021 dropping as much as 2.4 cents on the dollar to 84.62; setting the yield at a hefty 30.4%. DE107155147=

The euro-denominated debt also suffered losses with a perpetual AT1 bond callable in May 2027 falling 1.5 cents to 86.56, with the yield rising to 11.89%.

Gallery

Please peer review 3 community comments before your comment can be posted