Deutsche Bank in Focus as the Troubled Lender Plans 20K Layoffs

Deutsche Bank’s stocks fall at the lowest level. History of a decline started ten years ago

Deutsche Bank is one of the most influential banks in the world. It is one of the biggest banks in Germany. However, Deutsche Bank is also a bank under siege as shown on the chart below.

The chart shows that the company’s stock is trading at the lowest level in history. Its market capitalization has shrunk to just $15 billion. This means that companies like Lyft, Twilio, Shopify, and Zoom Video are more valued than the bank, which is an iconic company in Europe. The company enjoys a lot of support from German leaders.

This week, investors will focus on the company following the announcement that it intends to shed between 15,000 and 20,000 jobs. This will be a fifth of the company’s total workforce. It also comes after the bank cut another 7k jobs.

deutsche bank chart 7-19

The bank’s decline started in the financial crisis of 2008/9. At the time, the bank was active in the US markets and was exposed to the subprime credit crisis. At the time, most banks such as those from the United States accepted government bailout.

Without the bailout, it would have been almost impossible for most banks to survive. However, the bank’s management found it hard to accept government bailout.

This led to the loss of confidence by investors in the market because the company did not have a lot of liquidity. The company also continued to fail the so-called stress test. A stress test is a measure by the Federal Reserve that aims to look at how well the banks are positioned in case of a major economic crisis. This was worsened by the huge fines the bank was made to pay by US and other global regulators.

Recent years

In 2017, the bank was fined more than $5 billion for doing business with Russian entities. In total, the bank has received fines worth more than $10 billion. The bank has also seen increased employee turnover, especially at the management level.

In the first half of the year, Deutsche Bank attempts to merge with Commerzbank failed to materialize. This was a deal in which the government was attempting to create a European champion to help fund the country’s manufacturing sector.

This deal failed to materialize despite of the support from key shareholders. However, it also implied that combining two weak banks would be a good thing.

The bank is also considering exiting the US market, where it has been struggling to compete with its major peers like JP Morgan and Goldman Sachs. It is also considering creating a bad bank that could house or sell up to 50 billion euros of assets.

This announcement will likely be announced later this month as the management announces the half year results.

Another area that the bank is focusing is renewing the focus on transaction banking and private wealth management. The private wealth management has been used by banks like Credit Suisse as they attempt to recover.

However, saving the bank will not be easy. It is being investigated by the SEO on a number of actions. In the US, the congress is also investigating its association with Donald Trump. The bank became one of the only large banks to do business with him after multiple bankruptcies.

Therefore, while Deutsche Bank could be saved, it will not be an easy road. With so many layoffs being announced, the morale of the employees will remain being low, which could affect its performance.

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Other Useful resources

The Investor Relations of DB

Deutsche Bank Looks to Shed Big Chunk of Wall Street Presence – The Wall Street Journal

The history of Deutsche Bank

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