Will this be seen as the week when the Deutsche Bank supertanker started to turn, or began to list? The scale of the restructuring announced by chief executive Christian Sewing was certainly dramatic, but it left many in the City asking why the bank had waited so long before attempting to change course. Traders in the German giant’s share-dealing departments felt the first wave of reform particularly hard, with many in London, the US and Australia being given just a few hours to pack up and clear out on Monday morning. Revelations that some senior figures not affected by the cull were out getting pricey new suits cut as junior staff cleared their desk hardly sweetened the pill.
When sorrows come they come not single spies but in battalions, and while news of the £6.6bn turnaround scheme sunk in across the company, reports have emerged that the US Department of Justice is now investigating Deutsche as part of its ongoing probe into Malaysia’s 1MDB investment fund. Goldman Sachs has born the brunt of the DoJ’s investigation so far, and while Deutsche hasn’t yet been accused of wrongdoing it will be a disappointing blow to a bank that thought it had put mega-fines and legal payouts behind it.
Number-crunchers at Bloomberg say Deutsche has faced over $18bn in such costs since 2008. Add to this a post-crash regulatory environment that made life harder and harder for investment banks and it’s frankly amazing that Deutsche’s reckoning didn’t come sooner. City-watcher William Wright has described the bank as “a disciple of the ‘promised land’ theory of investment banking” – hoping that things would get better, regulators would cool off and rivals would fall away – opening up market share.
Such an approach had clearly run its course, and Sewing says he’ll now be “refocusing the bank around our clients.” This rather begs the question, around whom was it focused before? Investors are being tested, and the bank’s share price has slipped below €7 as doubts emerge about the likely success of the restructuring. It’s a long way off the mighty pre-crisis highs of €110. The question being asked is whether Sewing’s plan is just in the nick of time – or too little, too late?