Page 51 - Monocle Quarterly Journal Vol 1 Issue 1 Q4

How to Rob a Bank BY DAVID BUCKHAM
e USD 14 billion Deutsche Bank ne
When Deutsche Bank announced its 3rd quarter earnings for 2016 at EUR 278 million, representing a return on tangible equity of a measly 2 percent, the market counter-intuitively rallied. Clearly, investors must have already priced in an expected loss of EUR 350 million, predicted by a range of analysts. is would explain the stint of buying that was observed on the exchanges during the days following the results. Still, though, it is remarkable that a return on equity far below any acceptable threshold is now – as the Financial Times has put it – the new normal. Given the announcements in September 2016 that the US Department of Justice would levy a ne against Deutsche of USD 14 billion for market misconduct during the Financial Crisis of 2007 and 2008, investors breathed a metaphorical sigh of relief that Deutsche could eke out a pro t at all in the 3rd quarter.
When John Cryan started at Deutsche Bank as CEO in mid-2015, after taking over from Anshu Jain and Jürgen Fitschen – the ex co-chief executives of the Bank who had both left under a cloud – he surely did not expect his job descriptions to include desperately ying between Frankfurt and New York to negotiate more reasonable terms with the Department of Justice. Nor did he expect to be selling o assets such as Deutsche Bank’s stake in the Chinese bank, Hua Xia, or in Red Rocks Resorts, a gambling and entertainment conglomerate, under re-sale conditions. Or, for that matter, the sale of any asset at any price to avoid the ignominy of having to appeal to the German taxpayer to shore up the bank’s capital reserves to avoid technical failure.
To be clear, what may have been going through John Cryan’s mind whilst crossing the Atlantic at 40 000 feet on his way to yet another grilling with Department of Justice o cials, was probably the fact that Jain and Fitschen were let go from Deutsche only a month after unveiling a strategic plan to improve shareholder return – at the time a paltry 2.7 percent for the 2014 year end. eir undoing had been the USD 2.5 billion ne for
“Still, though, it is remarkable that a return on equity far below any acceptable threshold is now – as the Financial Times has put it – the new normal.”
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