The ax falls “Large white envelopes, tearful eyes, downcast faces and a clutch of bags and boxes were the tell-tale signs of workers leaving Deutsche Bank’s offices in London, New York and Tokyo for the last time” on Monday as Germany’s biggest bank began dismissing 18,000 workers.
American banks are filling the void in the “gaping hole in European banking” left by Deutsche Bank and other former “European financial powerhouses, strengthening their stranglehold” on the region. “More than halfway through the year, American banks such as Morgan Stanley and Goldman Sachs have racked up the highest revenues from advising on deals and arranging stock sales and bond issues in Europe. Such is their dominance that so far this year the top five banks in Europe by investment-banking revenue are all U.S. banks.”
Deutsche Bank’s “strategic reset” by shrinking back to its historic roots in Germany makes sense and is overdue, but “it will require flawless execution and may not go far enough.” The plan “addresses one of the reasons for Deutsche Bank’s woefully low profitability: the losses it makes in global investment banking operations that cannot compete with those of far larger U.S. rivals.” But it “doesn’t address another reason: Retail banking in Germany has never made much money.”
Deustche’s reboot was “a show of decisiveness at the expense of workers and a tacit answer to the question most asked by analysts and investors Monday: Deutsche Bank’s plan looks good on paper, but can managers pull it off?” According to CEO Christian Sewing, the answer is yes. “Some may say you have heard this before,” he said. “It is different this time.”
While some observers “praised the brutal honesty” of Deutsche’s massive overhaul, “big doubts remain over whether these radical efforts will be enough to change the narrative at the German giant, which has been brought to its knees by decades of hubris and poor management.”
Wall Street Journal
Overpriced? On an earnings per share basis, “American bank stocks look cheap right now,” but they “have ample downside” in an economic downturn. The paper says, "banks look like a good value, but a closer look at what analysts are penciling in leaves room for doubt."
New cop on the beat Linda Lacewell, the head of the New York State Department of Financial Services, is prepared to “police everything from financial marketing to online lending, especially as the federal Consumer Financial Protection Bureau has moved from oversight to education.”
Limited opening The Securities and Exchange Commission said firms that want to use bitcoin’s technology to raise capital for private companies “could satisfy regulators’ concerns,” meaning that “a limited number of crypto firms could be approved as digital-asset brokers in the near future. But firms hoping to provide a fuller suite of brokerage services, such as facilitating trades and holding securities for customers, aren’t there yet. The government thinks the crypto industry still hasn’t proved its ability to safeguard investors’ assets.”
The SEC is one of several regulators charged with the first phase of a joint rulemaking for the Financial Data Transparency Act.Photographer: Al Drago/Bloomberg
Bloomberg News
Financial Times
Changing of the guard HSBC USA has named Michael Roberts, Citigroup’s chief lending officer and global head of corporate banking and capital management, as president and CEO. He will succeed Patrick Burke, who is slated to retire in October. “Mr. Burke’s exit comes as HSBC attempts to revive its U.S. business, which has been a major drag on profitability for years. In its 2018 annual report, HSBC described turning around its U.S. operations as ‘its most challenging strategic priority.’”
Some break Australia’s banking regulator said it would raise capital requirements for the nation’s banks by three percentage points in five years, less than the four to five points it had talked about earlier, due to concerns about “a lack of sufficient market capacity to absorb” a bigger requirement. “The new capital rules are intended to make the banking system more secure and support the orderly winding down of banks in the event of their failure.”
Quotable
“It’s a very depressing picture if you’re a European bank. They’re being killed by a thousand cuts.” — Martin Armstrong, chairman of London-based executive search firm Armstrong International, on the growing dominance of American banks in Europe
The JPMorgan Chase CEO took aim Tuesday at the proposed Basel III endgame rules, hindrances to mergers and bureaucratic burdens. "I would love to have a more productive relationship with regulators, but I think it takes conversation," Dimon said.
Many legal experts think the Supreme Court will rule in favor of the Consumer Financial Protection Bureau in a case challenging its funding. Such a ruling would unleash a flurry of litigation that has been on hold pending the outcome of the constitutional challenge.
Lawmakers including one of the original sponsors of the Corporate Transparency Act have filed an amicus brief in the appeal against an Alabama court ruling that the law is unconstitutional, which would throw into question Treasury's newly-established beneficial ownership structure.
The Connecticut bank —a regional traditionally regarded as a cautious lender — said nonperforming loans and leases rose 53% year-over-year. The uptick was in mostly the commercial-and-industrial loan space, although there was one nonperforming commercial real estate loan, executives said.
The two regional banks are anticipating that borrower demand will increase in the back half of the year. High interest rates and economic uncertainty have been muting the appetite for borrowing.
