This week, new worlds of photographic archives can be expanded with new dramatic images of what to do if someone wants to illustrate an article with crying bankers. On Monday, Deutsche Bank, one of the world's best-known banks, fired 18,000 people around the world after announcing that it almost completely dismantled its investment banking department so that the German bank offices in New York to London moved to Hong Kong and disappointed in bags and bags. or in particular torn / low-skilled workers.
With a radical move, which is in fact a huge response, the bank would like to make mistakes for the past decade. That was enough for a bad decision and a scandal, because without exaggeration it can be said that Deutsche Bank is one of the main characters of every major financial scandal in the last decade and a half. From the 2008 crisis to manipulating European interbank interest rates and money laundering of bandits to finance Trump's tricky transactions. The question is whether this will be enough to find the bank that is struggling after the crisis.
Behind the big backhand
For some time, the leadership of Deutsche Bank was preparing for a big step, the bank's CEO, Christian Scheiding, promised shareholders in May that they complained that after the bank's paper price had fallen by 40% over the past almost a year. Slowly a cigar box cost more than a share.
The largest German bank was not really an easy year:
- the German government tried to contact the commerzbank, the deal then broke,
- US and British authorities have begun to investigate Deutsche Bank's involvement in the fact that Russian gangsters close to the Kremlin have cleared $ 20 billion in European banks;
- US President Donald Trump has begun to sue the bank for failing to provide US financial intelligence to investigative commissions, which raised many questions about how the bank helped the US president.
Sewing promised shareholders that it would radically reduce most of the scandal, the bad press and the banking business, and reduce the bank's $ 1 billion cost, mostly through mass layoffs. The company's management has already promised the slogan that they are returning to what the bank is doing at that time and that it has always been its most important task, namely to fund German competing German companies. In other words, the last few decades of global investment banking adventures are now considered a little misconception by management, which has only made the money the most, but has made mistakes.
Deutsche Bank is approximately the same age as United Germany, and in 1870 it was created to finance the rapid industrialization and expansion of trade in a country wishing to achieve international economic lag. He did so pretty much until the fall of the Berlin Wall, but in the era of booming economic globalization, the bank's management decided to turn into a real global bank and start buying smaller financial institutions in England, Spain and elsewhere. It began to expand into global financial centers, and in 2001 it was introduced to the New York Stock Exchange.
The German company wanted to compete with giants such as Morgan Stanley or British Barclays. However, it is much smaller, even if it is the largest bank in Germany. This is because, as we wrote earlier, the German banking market is very fragmented, most of it covered by small provincial banks and savings cooperatives, while private commercial banks, such as Deutsche, account for only 40% of the German market . In addition, the German industry producing the export market is financed almost entirely by Deutsche Bank, covering 80% of this market.
That is why the German Federal Ministry of Finance considered it better for Deutsche Bank and Commerzbank to merge, the bigger and stronger company that would be able to build better support for the ill-suited German economy and better help competitive German and American competitors. business.
However, besides the German government, no one wanted such a merger, including the employees of the two banks, its main shareholders, the German competition authority and the European Central Bank. Therefore, Deutsche Bank's management decided to strengthen corporate lending and support for the German economy by giving up its global dreams, which have already begun to become a nightmare.
Deutsche Bank's experience of becoming a global retailer was not very successful because, on the one hand, after the financial crisis, it failed to take on itself even in 2016 when the world was afraid to face a new crisis, but then in another. she really took part in everything that was just bad and bad in the financial world.
For example, Deutsche Bank played a very important role in the trading of investment products made from the packaging of fundamentally bad housing loans, which ultimately triggered the very economic crisis of 2008. In fact, the bank's trustees not only sold practically unsecured, useless derivatives, but have also invented investment tools to assume that the entire mortgage credit system has been rejected (for the Big Thief, one of the heroes of the Guardian being the model of one of the American Emperors Deutsche Bank).
However, the bank has fallen tremendously over the crisis, for the first time in 2008, for five decades, it was unprofitable, ending the year with a loss of 3.9 billion Forints. And since it was not found then, the price of its shares has never returned to pre-crisis levels. Mortgage loans even pursued the company many years later, and US authorities were threatened with a fine of $ 14 billion a few years ago (ultimately settling about half of that amount). Then he had to pay the bank for more misfortunes:
- due to the fact that their triads affected the interbank interest rate in London by working together with the employees of other banks, they had to pay a $ 2.5 billion fine to the British and US authorities;
- the violation of US sanctions against Iran and Syria has again brought $ 258 million;
- the aforementioned Russian case of money laundering costs $ 630 million;
- Last year, a financial regulator in New York cut a fine of 205 million euros for the bank that it had not previously checked the foreign exchange business.
In recent years, the bank had to pay a total of 17 billion dollars to pay for such unpleasant problems,
which is a lot of money and does not go well for the good image of the German banks. In addition, the financial institution, which employs more than 90,000 people worldwide, has grown more than what can be profitable, and no wonder that 6,000 people were sacked last year. In addition, it seems that the European Central Bank remains low for some time in the eurozone, which means that classic banking will not do as much as it could at any time and because of tightening after the crisis, it is far from being a good deal. sale of structured investment instruments. So it really does appear that without radically repositioning, there is only one more fight for the bank.
Deutsche Bank's strategy is not just a huge cut: besides reducing the wealth of money-based investment banking, it creates a "bad bank" that puts all its bad and bad investments and tries to sell them trying to sell them. to remove them from the books of the bank.
And then, according to Sewing's promise, the boring, conservative, classical banking operation has come, which hopefully will be profitable over time to appease the bank's shareholders and increase the exchange rate. How successful that will be, the question is whether Deutsche shares have risen on Wednesday after a two-day decline, suggesting that investors are like Sewing's courage and seeing the potential in the new direction.
But the balls will not end. After the major cutback and announcement of the new strategy, it turned out that the company spent a total of 52 million euros in the last 14 months to pay the top managers who had just left because they could not take the bank out of the pit were. And this is when 18,000 people, partly because of the mistakes of these leaders, can look for a new job, not a really good message. It turns out that the London managers of the bank have taken their size in their office for only £ 1,200 or more than $ 400,000 while hiring up to 3000 people at lower levels due to cost savings.
Anyway, the largest German bank seems to be trying to leave behind the worst and most miserable part of its history. Whether a backhand will appear will determine the time.