Deutsche Bank Stock Signaling Its Demise?

Deutsche Bank, the largest bank in Germany and one of the largest in Europe, is witnessing worrying stock woes. In 2007 Deutsche bank’s stock was listed at $120 per share. However, the stock fell to $28 a share in the aftermath of the financial crisis. Today, it’s stock is at an all-time low of $6.70 a share, a far cry from its 2007 peak.

Since the financial crisis of 08, the company has been struggling to resume its earnings growth. In 2018 Deutsche Bank’s revenue and net income were $24.79 billion and $266 million. These numbers were meager compared to Bank of America’s $66.77 billion and $28.15 billion. Bank of America is a prime competitor to Deutsche Bank with a stock price of $26.51 a share.

In 2018 Deutsche Bank decided it was time for a change in order the save the company. In April Christian Sewing was declared the new CEO of Deutsche Bank. It didn’t take long for Mr. Sewing to make cuts within the company. In May 2018 Christian Sewing announced lay off of almost 10,000 workers in the hopes of reducing costs while stabilizing earnings.

Deutsche Bank’s Cuts

However, it doesn’t look like the cuts are working as the bank is still in serious trouble. The company’s multiple litigation issues didn’t help as it found itself spending $17 billion in the last decade over legal matters. In short, Deutsche Bank’s growth has all but stagnated.

In April of 2019, the bank announced lower earnings growth for the year. Income from buying and selling securities fell 19 percent in the first quarter, its weakest first quarter since the financial crisis. In the past few years, the bank has been losing money, and the only solution CEO Sewing has in mind is to implement more cuts.

I doubt the cuts will somehow solve the bank’s problems. If it hasn’t worked in the past, it’s not going to work in the future. But perhaps it could be that they’re not making enough cuts. Deutsche Bank still has 90,000 employees globally, which means it’s still a huge company. Its quite possible Deutsche Bank will have to start over as a much smaller local bank.

Of course, no investor is going to want to be a part of a restructuring program where the company loses a tremendous amount of market share. But if it means the survival of the company, then it may be the only choice it has, outside of a likely government bailout.

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