One of these quarters Deutsche Bank is finally going to report a quarter that is not a disaster… just not today.
This morning, Germany’s biggest bank reported its first earnings under its new CEO, Christian Sewing, which missed across the board: Q1 net revenue missed the lowest analyst estimate, coming at €6.98 billion, down 5% and below the estimate €7.27 billion, also missing the low end of the range (€7.12 billion to €7.33 billion), and unlike other banks where at least the rebound in equity trading helped offset stagnant FICC, that was not the case for DB where sales and trading crashed by 17% to €2.45 billion – compared with a an average 10% increase at the big 5 US banks – resulting in a 74% collapse in pre-tax income for the corporate investment bank.
Summing it up, Deutsche’s pre-tax income more than halved to €432MM from a year prior, missing average analyst expectations by almost a third, and resulting in a paltry €120 million in after tax profits, a 79% plunge Y/Y.
Christian Sewing, DB’s new CEO, who unceremoniously replaced John Cryan one month ago, did not mince his words when slamming the abysmal results: “We are on a good track both in the DWS asset management business and in our Private & Commercial Bank, although we need to substantially improve profitability in both. Our Corporate & Investment Bank is also doing well in some areas and held or gained market share in certain areas. However, we are not strong enough in other areas of this business. Therefore we have to act decisively and to adjust our strategy. There is no time to lose as the current returns for our shareholders are not acceptable.”
That was just the beginning, however, and as was rumored previously, the bank announced a sweeping restructuring plan, abandoning ambitions to be a top global securities firm, scaling back U.S. rates sales and trading, reducing the corporate finance business in the U.S. and Asia, and reviewing its global equities business with a view toward cutting it back, the bank said in a statement. The measures will lead to a “significant reduction” in the 97,130-person workforce this year, Deutsche Bank said. Read: massive layoffs.
Putting DB’s collapse in context, just minutes later, UK’s Barclays, Deutsche’s biggest European peer, beat trading expectations for a second straight quarter, with revenue from markets rising 8 percent. Deutsche Bank stock tumbled as much as 4.2% before reversing losses and trading unchanged. The stock remains among the worst performers among European banks over the past years, and are trading 87% below its 2007 high.