Will Deutsche Bank rise once again?

I've been looking at DB's financials and it seems to me that they are doing well at the moment. 

2018 IB Revenue/Profit/Margin: 7.5B Euros / 861mm Euros / 11.5% 

2019 IB Revenue/Profit/Margin: 7.0B Euros / 458mm Euros / 6.5%

1H 2020 IB Revenue/Profit/Margin: 5.0B Euros / 1578mm Euros / 31.5%

I know that COVID-19 certainly helped them out this year, but damn, that is still a major improvement. Revenues are way up, but most importantly, their profit margin this year has been fantastic compared to recent years.

Does that mean the transformation is working well? Are they on their way to becoming a top-tier bank once again? Is their future looking good?

I am a prospect with strong alumni/connections at DB, so I am wondering if I would be well off if I went to DB. FWIW, I want to go into S&T.

Comments (13)

  • Associate 1 in IB - Gen
Oct 3, 2020 - 12:47pm

I think it will be better for sure as DB over the past few years has been problematic, but I just don't think it will become as competitive and relevant as it used to be.

The old glory of DB were based on a few things: 1) aggressive global expansion (more of a global bank than a german bank), 2) trading extremely high risk exposure for profit opportunities in a favorable regulatory environment and thus posting some unimaginable numbers by today's standard (18% ROE and 2 trillion assets in 2007 but insane derivatives exposure), 3)strategic importance as Germany being a top 3 economy in the world and German corporations being globally dominant in some of the most important industries, 4) consequently became a reputable brand name capable of drawing talents (attract some of the best trading talents & was able to poach a ton of senior bankers from Merrill and other places when it started growing its US advisory business around early 2000s). 

However if you look at DB today and in the near future, I just don't see many ways through which DB could regain its competitiveness. On the commercial banking side, interest rate environment is not gonna be favorable in the near term, and Germany & Euro are facing some serious economic slow down. On the investment banking side, the good day for trading is gone for ever. DB is a good balance sheet bank, which will not change. But it has cut its entire equity line and lost the ability to compete for sweet front page IPOs. The advisory business is all about people. Talents are jumping ship and are reluctant to come. Compared to its European peers, DB has no legacy in investment banking in the US and certainly has dropped its ambition to aggressively expand here. Meanwhile, DB is not like JPM, a brand name itself that makes people want to do business with you as long as you are half good.

That said, sure I think Sewing and his crew can do a better job at managing the bank itself and increasing the share price, and despite of the "db not a bb meme", DB is still a globally systematically important bank with some good banking legacy and a headquarter building in NY. But for juniors, I say it would be wiser and safer to go with others when you have options. 

  • Prospect in S&T - FI
Oct 3, 2020 - 7:51pm

Thanks for the great response! I see that you say the good days for trading are over, but isn't that DB's strongest area? Aren't they still one of the best in FICC? That's where most of their IB revenue comes from, like 80% or something 

  • Associate 1 in IB - Gen
Oct 4, 2020 - 1:23am

yea, FICC is still the bread and butter of DB, but it is unlikely for any investment bank to rely on s&t to gain market dominance in today regulatory environment. s&t nows generates less total revenue and counts for a smaller share in the revenue mix. I remember seeing total FICC S&T revenue for the five largest us banks had dropped nearly 80% between 09 and 18, while the revenue share of s&t dropped from somewhat 30% to 22% during the period. 

Oct 3, 2020 - 10:36pm

Obviously really hard to say. I am kind of rooting for them but I think that last quarter's earnings were not as good as they may have seemed comparatively within the industry. I think that the regulators were very kind to them w/ loan provisions and obviously got a boost from trading revenues, along with everyone else on the street. I don't work in FIG so I am not going to pretend to know the intricacies, but I think that they had the easiest possible time they were going to have with this coupled with incredibly easy comps. They have a ways to go. 

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Oct 4, 2020 - 1:24am

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