Sunday 22 September 2019

Recession fears weigh on Deutsche Bank


Deutsche Bank CEO Christian Sewing. Photo: AP
Deutsche Bank CEO Christian Sewing. Photo: AP

Steven Arons

One month into Deutsche Bank's boldest restructuring effort yet, the world seems to have turned against chief executive Christian Sewing. Or at least, Germany has.

Fears of an economic recession and the spectre of even lower interest rates have taken a toll on banks across Europe. But for Sewing, who just pinned his bank's future on closer ties with Germany's export-oriented companies in a pivot away from Wall Street investment banking, the rapid deterioration comes at a particularly bad time.

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Shares in the Frankfurt-based lender fell to a record low this week, as reports showed Germany is teetering on the edge of recession.

Manufacturers are reeling from the trade war between the US and China, with big exporters such as Daimler, BASF, Continental and Henkel cutting forecasts.

Should their woes get worse, they could complicate a revamp that has little room for error, after a series of costly and unsuccessful turnaround efforts under Sewing's predecessors.

"Deutsche Bank's restructuring plan has been ambitious from the start and Germany's economic slowdown will make it that much harder to achieve," said Philipp Haessler, an analyst with Pareto Securities who has a hold recommendation on the bank.

Sewing is cutting 18,000 jobs and exiting equities trading in a further retreat from Wall Street, while focusing on the transaction bank that serves corporate clients.

Despite the recent decline, Deutsche Bank's shares have outperformed peers since Sewing flagged "tough cutbacks" to the investment bank at a shareholders' meeting in May.

Anticipating an economic slowdown, the Finance Ministry had encouraged merger talks earlier this year between Deutsche Bank and Commerzbank, in which Berlin still holds a roughly 15pc stake. But after more than five weeks of meetings, Sewing in April walked away, saying it would be too difficult to execute and would not justify the restructuring costs.

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