Deutsche Bank's leader rejects the investment bank's strategy recovery
Deutsche Bank's investment bank does not need a basic strategic overhaul following merger negotiations with competitor Commerzbank, according to the German lender's manager.
Paul Achleitner, head of the Deutsche Supervisory Board who has been seen in Frankfurt as a supporter of the Commerzbank merger, defended the current turnaround in the investment bank, which has been disbanding for two consecutive quarters.
"Every manager must constantly adapt to a changing market environment. But in this regard, we're not talking about strategy, we're talking about execution," he told the Financial Times in an interview. "Especially in a business like the capital markets one, which is so volatile and so rapidly changing, there will be permanent adjustments."
Asked for a more basic shift was needed by the investment bank, Achleitner replied: "No." However, he said this was his personal view and that the board was responsible for the lender's strategy.
Large Investors and Regulators for Several Months has asked Deutsche Bank to increase its efforts to reverse the investment bank. [1[ads1]9659002] Following the appointment in April last year, CEO Christian Sewing pushed through a restructuring of Deutsche's corporate and investment competition, reduced the balance by 12 per cent and slaughtered 8 per cent of the office's employees, in particular in US stocks.
In the first quarter of 2019, revenue continued to fall faster than the cost, while trading revenues went up to 19 percent.
JPMorgan analyst Kian Abouhossein estimates that Deutsches US shares operate burn € 200m – € 300m a year before tax "They have no choice but to raise some underperforming assets," he told the Financial Times 9659008] Paul Achleitner, Head of Deutsche Bank's Board of Directors © Reuters
In a conversation with analysts on Friday after the collapse of merger negotiations with Commerzbank, he said he would not be "drawn on speculation of strategic options".
He said the management group's starting point was that Deutsche "will remain a globally relevant financial institution" that has a meaningful presence in the US and Asia. Mr Achleitner supports this approach
"We just come out of a quarter where the team delivered again. Of course you can say: it could have been more. But it was already four times as much as analysts had expected," he said with the quarterly results on EUR 201 million compared to the EUR 55 million expected by analysts.
"If you are in such a position, why would you suddenly turn things over?"
Achleitner disputed the show shared by some analysts that Deutsche started the merger negotiations after they had stopped failing to solve their problems under its own steam.
"The impression may be knocking around, but it's wrong," he said, claiming that he was personally just looking for the deal to be considered.
"The purpose of the experiment was to move from opinions to facts, and then to make a evidence-based decision. This has been accepted by everyone."
The main obstacle that led to the talk failing was unimpressive returns expected in terms of to the capital need, said Achleitner.
At the end of March, FT reported that Deutsche could have increased up to NOK 10 billion in additional capital to finance an agreement. Mr Achleitner called this number too high, but said that the whole package was not convincing enough to take it to the bank's shareholders.
As early as 2010, Deutsche has increased a total of NOK 30 billion in four capital increases.
According to the former Goldman Sachs merger and acquisition bank, the collapse of conversations with Commerzbank would give the idea of merging Germany's two listed lenders to rest "once and for all". While there was no formal vote on the agreement, the decision was supported by all members of the Deutsche Supervisory and Management Council.
Achleitner added that Deutsche Bank was unaffected by the possibility that Commerzbank was bought by a foreign rival. He said probable scenarios for his local rival, taken over by a foreign competitor, were "part of the considerations that led to the decision" to leave merger negotiations.
Ask if he was worried that such a move could weaken Deutsche in his home market, Achleitner replied "no". FT has previously reported that Italy's UniCredit is ready to bid on Commerzbank if the domestic merger falls, and the Dutch lender ING has also flagged interest in a context.
Achleitner acknowledged that the foreign rivals' appetite for Commerzbank had been an incentive to enter into the merger negotiations in the first place. The negotiations started in mid-March and were supported by the German government, which owns a 15 percent stake in Commerzbank.
"Imagine what kind of conversation we would have if Thursday's news had been that someone else had bought Commerzbank [with Deutsche Bank staying on the sidelines]," said Achleitner, suggesting that the lender would have been severely criticized for being caught "on the hop". 19659025]
