Wall Street on Deutsche Bank: Restructuring plan may be too 'radical' and too 'optimistic' - CNBC

A customer pays a taxi-driver near the offices of Deutsche Bank AG in London, U.K., on Monday, July 8, 2019. Deutsche Bank announced a sweeping turnaround plan that will transform Germany's biggest bank, with Chief Executive Officer Christian Sewing radically shrinking and reshaping its global operations. Photographer: Jason Alden/Bloomberg via Getty Images

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Big players on the Wall Street have termed Deutsche Bank's major restructuring drive as "very deep," "radical" as well as "challenging."

Deutsche Bank announced Sunday that it will pull out of its global equities sales and trading operations, scale back its investment banking and slash thousands of jobs as part of a sweeping restructuring plan to improve profitability.

Deutsche will cut 18,000 jobs for a global headcount of around 74,000 employees by 2022. The bank aims to reduce adjusted costs by a quarter to 17 billion euros ($19 billion) over the next several years. The shares were down more than 6% in U.S. trading Monday.

While the embattled lender may have gone through a number of strategy overhauls in recent years, its CEO James von Moltke told CNBC Sunday that the bank is determined this new round of restructuring will be its last.

One of the risks that market analysts perceived of Deutsche's restructuring plan was its impact on the larger banking sector. CNBC takes a look at what the analysts from major banks have to say about Deutsche Bank's biggest ever restructuring plan.

Goldman Sachs

Goldman Sachs in a note on Monday called the restructuring as "very deep" but warned of challenges.

"A very deep restructuring, by any measure. Media reporting ahead of Sunday's board meeting was intense, yet the announcements still surprised in terms of their scope and scale, Goldman Sachs noted.

"DBK's structural challenges, as we see them, fall into three categories: the absence of a high-return platform, elevated funding costs, and uncertainty around the scope of its IB business," the note stated.

On the big job cuts and exit from global equities sales, Goldman notes that it is bigger than what was expected.

"Whilst we did expect DBK to substantially scale back its equities operation, we did not expect a wholesale exit across geographies - including in its home market of European / German equities - and business lines."

Citi

Citi, in a research note, termed the restructuring plan as setting "optimistic targets."

"In a well-telegraphed announcement after two weeks of media headlines Deutsche Bank has confirmed a significant restructuring," the note said.

"Restructuring charges of €7.4 billion (c12% of tangible equity) are heavier than anticipated, but spread out over 4 years. Management intends to fund this from existing resources, so there is no capital raise. This may yet prove optimistic."

Citi has set a price target of 6 euros for the German lender and rates it as "high risk" for exposure to a number of outstanding litigation issues.

Bank of America Merrill Lynch

Bank of America Merrill Lynch called the plan "ambitious" but said a number if questions still remain unanswered.

"This is an ambitious plan for sure, with larger cost cuts and a higher targeted RoTE than expected. Capital elements were largely anticipated by the market, but in our view leave the bank's strategy in the hands of the regulators, BofAML analysts Andrew Stimpson and Alastair Ryan said in a research note Monday.

"Without a reduction in capital requirements or the ECB (European Central Bank) agreeing to allow operational RWA (risk-weighted assets) to reduce faster, then DBK may have little capital to deploy into the higher multiple businesses it wishes to grow," the note added.

J.P. Morgan

JP Morgan termed it as a "bold restructuring" but also said "execution remains key"

"DB restructuring in our view is bold and for the first time not half-baked but a real strategic shift giving up its Tier I IB ambitions. DB is rightsizing to where it came from originally, a corporate bank with the addition of a large Fixed Income footprint."

"We believe further questions need to be answered such as: i) credibility around execution, ii) revenue growth details and rationale, where DB has disappointed in the past, iii) employee motivation post the restructuring to go for regaining market share in Fixed Income and around DB's ability to operate a corporate franchise without a European equity business."

J.P. Morgan in its note further stated that there are a number of upside and downside risks. These could include global economy undergoing a slowdown with a corresponding deterioration in credit quality and weaker revenues, which could affect DB's profitability. Execution risk on the latest strategy announced could pose as both upside and downside headwind, according to JPM.

Morgan Stanley

Morgan Stanley in its research note stated that the new targets set by Deutsche Bank seem "ambitious at first take."

"Investment bank is being materially scaled back. Despite the size of RWAs cut, it is self funded with target CET1 (common equity Tier 1) ratio at 12.5%. Execution details will be key to potential re-rating," Morgan Stanley said in a note.

"In fixed income, DBK also aims to scale back significantly (in Rates in particular), reducing RWAs allocated to this business by 40%. Overall we think the strategic announcement could lead to a short-term bounce for the stock on no dilution, yet any potential re-rating will depend on details on execution," the note added.

Morgan Stanley added that even though Deutsche Bank's overhaul plan has been discussed at length with the bank's home regulator Bafin, they expect Europe's Single Supervisory Mechanism (SSM) — the European institution that oversees banks in the euro zone — to be informed as well as be content with the CET1 minimum target.

Deutsche Bank has reduced the CET1 target to >12.5% from >13.0% in its latest plan.

Barclays

Barclays' analysts have warned they expect Deutsche Bank shares to be volatile on the back of the latest restructuring plan.

"The reduction in the CET1 ratio target had been suggested in press articles last week - e.g. FT, Bloomberg - and so is not a surprise. Nevertheless it will be important to see the capital trajectory that management are assuming in the coming periods, and the conviction/assumptions surrounding that," Barclays said in the note on Monday.

Barclays' further adds that investors will be keeping an eye on how this plan is executed.

"It will also be important to see how management will execute on the cost reduction, given its scope, and whether this can be done without revenue consequences. Further it will also be interesting to hear how all the planned investments in IT and controls will be paid for."

RBC Capital Markets

RBC termed the restructuring "more radical than expected" and will support the share price in the short-term. RBC also increased its price target on Deutsche Bank.

"We raise our PT (price target) from EUR7.5 to EUR8ps. However, as the plan pushes the profitability improvement further out in time on our estimates, we see more value elsewhere in the sector. Maintaining Underperform, Speculative Risk."

RBC also stated that Deutsche Bank's announcement is a "material transformation plan" and if the set ROTE 2022 target of 8% is delivered then there could be significant upside in the shares.

"We believe the near-term profitability will remain low; in fact, on our estimates the transformation leads to a deterioration. We expect peers to be better placed to weather any deterioration in the macro political environment and to benefit from business lost at DBK. The transformation plan will also lower DBK's CET ratio and there is a risk that it might have to raise capital."

UBS

UBS, in a note on Monday, said Deutsche Bank's new plan shows the willingness and determination to change the profile of the bank.

"The new strategy in our view aims at breaking through the self-feeding debt/equity circle which we have often discussed in our research and to make Deutsche less of a levered market play vulnerable to external events," UBS said in its note Monday.

UBS further states that short-term market reaction could be positive. "Progress over the coming quarters could then further increase the market confidence in the plan. That said, overall market conditions and restructuring uncertainties could materially impact revenues. Some key questions remain: What about frictions and (negative) side-effects? Execution uncertainties?"

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https://www.cnbc.com/2019/07/08/wall-street-analysts-say-deutsche-banks-restructuring-may-be-too-optimistic.html

2019-07-08 14:24:16Z
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Amazon workers in Minnesota plan Prime Day strike despite $15-an-hour pledge - INFORUM

Workers at a Shakopee, Minnesota, fulfillment center plan a six-hour work stoppage July 15, the first day of Prime Day. Amazon started the event five years ago, using deep discounts on televisions, toys and clothes to attract and retain Prime members, who pay subscription fees in exchange for free shipping and other perks.

"Amazon is going to be telling one story about itself, which is they can ship a Kindle to your house in one day, isn't that wonderful," said William Stolz, one of the Shakopee employees organizing the strike. "We want to take the opportunity to talk about what it takes to make that work happen and put pressure on Amazon to protect us and provide safe, reliable jobs."

Amazon, through a spokeswoman, declined to comment on the planned strike.

In Europe, where unions are stronger, Amazon workers routinely strike during big shopping events like Prime Day and Black Friday. Until now, Amazon's U.S. workers haven't walked off the job during key sales days. About 250 union pilots who haul packages for Amazon and DHL Worldwide Express staged a brief strike in the leadup to Thanksgiving in 2016 before a federal judge ordered them back to work, eliminating any disruptions during the peak holiday shopping season.

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As one of the world's most valuable companies -- led by Jeff Bezos, the world's wealthiest person -- Amazon has become a symbol of income inequality. Critics say it benefits from tax breaks to build warehouses but pays workers so little that some are forced to seek government assistance for basic needs like food and health care. The pledge to pay $15 an hour didn't happen until the company had weathered attacks from politicians such as presidential hopeful Bernie Sanders, who proposed a "Stop BEZOS" act that would have imposed a tax on companies like Amazon to make up for the cost of government benefits like Medicaid for their employees.

Of late, warehouses in Minnesota's Twin Cities region have become an epicenter of worker activism, led by East African Muslim immigrants who organizers say compose the majority of the five facilities' staff. Last year workers thronged the entryway of a delivery center chanting "Yes we can" in Somali and English, presenting management with demands such as reduced workloads while fasting for Ramadan. They also circulated flyers at a nearby fulfillment center urging co-workers to wear blue shirts and hijabs in support of the same cause.

Organizers say the actions led to talks between employees and management last fall and spurred some modest changes. These include relaxing pressure on workers to meet quotas during Ramadan and the designation of a conference room as a prayer space.

But they say the company has failed to meet worker demands such as converting more temps to Amazon employees and permanently easing productivity quotas they allege make the jobs unsafe and insecure. In a letter last year to the National Labor Relations Board that was reported by The Verge, an attorney for Amazon said that hundreds of employees at one Baltimore facility were terminated within about a year for failing to meet productivity rates. In March, workers staged a three-hour strike.

On July 15, employees at the Shakopee facility plan to strike about three hours at the end of the day shift and for about three hours at the start of the night shift. In the afternoon, workers also plan to rally outside the facility, located about 25 miles from Minneapolis.

In an effort to show solidarity, a handful of Amazon's white collar-engineers intend to fly to Minnesota to join the demonstration, where activists will demand the company take action against climate change as well as easing quotas and making more temps permanent employees. "We're both fighting for a livable future," said Seattle software engineer Weston Fribley, one of several employees from the group Amazon Employees For Climate Justice who will be making the trip.

It's the latest example of tech employees with very different jobs trying to forge common cause in the hopes their bosses find their demands harder to ignore.

"We see that our fights are stronger together," said Abdirahman Muse, executive director of the Awood Center, the worker advocacy group spearheading the Minnesota activism, whose backers include the Service Employees International Union, the Teamsters, and the Minnesota chapter of the Council on American-Islamic Relations. Muse said he expects more than 100 workers to strike.

Workers are also pressing their case to the federal government, claiming their activism earlier this year was illegally punished. Workers filed a pair of complaints last week with the National Labor Relations Board. The first, filed against Amazon's staffing vendor Integrity Staffing Solutions, alleges that it illegally retaliated against a worker who organizers say had been mobilizing co-workers for the March strike and was terminated as he was about to walk off the job to participate.

The second complaint, filed against Amazon itself, claims the company retaliated against other workers who went on strike in March by deducting hours from their unpaid time off allotment. The hours they spent striking were counted against the 20 total hours workers can miss each quarter without being fired, according to organizers. Such actions could chill workplace activism and run afoul of federal law, even if they didn't lead to any actual terminations, said Seattle University law professor Charlotte Garden.

"It's a violation of labor law when an employer punishes workers for striking, and one way of punishing workers for striking is to take some of their leave away," she said.

The labor relations board has received about 50 complaints about Amazon, most of which have been withdrawn or dismissed. The Shakopee worker complaint stands out since it alleges collective mistreatment of more than a dozen staff.

The Amazon spokeswoman said that company had yet to see the complaint about alleged unfair labor practices.

Logistically, the strike will probably amount to little more than a hiccup to Amazon because other facilities and people can easily pick up any slack. Still, the action shows that Amazon workers, buoyed by a tight labor market and employee activism elsewhere, have been emboldened to demand better treatment. Nor will the political pressure go away. Sanders and Elizabeth Warren, another leading presidential candidate, have both called Amazon out over allegations it interfered with Whole Foods workers' right to organize.

This article was written by Josh Eidelson and Spencer Soper, reporters for Bloomberg.

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2019-07-08 14:00:00Z
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Layoffs have started at Deutsche Bank. 18,000 jobs are going - CNN

CEO Christian Sewing confirmed during a conference call that layoffs had started Monday in Asia. He said Deutsche Bank teams in other parts of the world would also be affected.

Sewing unveiled a restructuring on Sunday that will eliminate roughly one in five jobs at the German bank.

"I am very much aware that in rebuilding our bank, we are making deep cuts," the CEO said in a letter to employees. "I personally greatly regret the impact this will have on some of you."

Deutsche Bank has not given details on which offices will bear the brunt of the downsizing. The bank has said its workforce will shrink to roughly 74,000 employees by 2022.

In addition to Asia, it has big offices in London and New York and branches and outposts throughout the world.

"We will only operate where we are competitive," Sewing said Monday. "We tried to compete in nearly every corner of the banking market at the same time. We simply spread ourselves too thin."

Deutsche Bank (DB) will shrink its investment bank as part of the overhaul, shutter its equities sales and trading business and create a "bad bank" for €74 billion ($83 billion) in assets.

It's a dramatic shift for a bank that has been in business for nearly 150 years. But urgent action was needed after recent attempts at restructuring failed to produce consistent profits.

Investors reacted with skepticism. After an initial move higher on Monday, shares reversed course and were down over 7% in afternoon trade in Frankfurt. The stock has shed more than 40% since Sewing became CEO 15 months ago.

Retreat from Wall Street

Germany's biggest bank at one point dreamed of dominating investment banking, competing with the likes of American heavyweights Goldman Sachs (GS) and Morgan Stanley (MS).

Those ambitions were made clear in 1999 with the purchase of US investment bank Bankers Trust.

But the bank — and its investment banking team in particular — struggled to find direction following the global financial crisis. The bank reported an annual profit last year for the first time since 2014.

A sluggish European economy and a reluctance to reform made it harder for Deutsche Bank to compete in the expensive sector.

The investment bank continued to suck up resources even as it fell further behind competitors. The resignation last week of the division head, Garth Ritchie, signaled that major changes were coming.

The shift announced Sunday will let Deutsche Bank take a step back from investment banking and prioritize more reliable lines of business such as corporate money management.

But the restructuring effort won't come cheap.

The bank said that costs related to the overhaul would push it to a net loss of €2.8 billion ($3.1 billion) for the second quarter. The total cost of the restructuring will hit €7.4 billion ($8.3 billion) by 2022.

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https://www.cnn.com/2019/07/08/investing/deutsche-bank-layoffs/index.html

2019-07-08 13:33:00Z
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Elon Musk says free self-driving chip upgrade could come to older Teslas this year - The Verge

Tesla CEO Elon Musk says the company will “most likely” start retrofitting its new, more powerful processing chip into older vehicles near the end of the year. The new FSD chip is the first to have been designed in-house. Tesla says it offers 21 times the performance of the Nvidia chips it replaces — a claim Nvidia disputes. The new chip has been shipping in Model S, X, and 3 cars since before its announcement, but soon it will be offered as a free upgrade to half a million Tesla owners.

Elon Musk has made big promises about the new chip, which he claims has enough power to eventually allow for fully self-driving cars, if and when the software catches up. The upgraded FSD computer includes two of these new chips for redundancy. Despite being a lot more powerful, the company says the new chip costs 20 percent less than its previous “HW2+” Nvidia hardware, and only draws a bit more power.

End of Q4, most likely

— Elon Musk (@elonmusk) July 8, 2019

The FSD chip upgrade will be offered for free to any Tesla owners who have paid for the company’s “Full Self-Driving” add-on package, which costs $6,000. That’s about 500,000 cars, according to Musk’s estimate. The option currently gives you access to Tesla’s Navigate on Autopilot feature, which is capable of guiding you from “on-ramp to off-ramp” on highways, meaning it can suggest lane-changes, navigate highway interchanges, and can proactively take exits. Without it, cars are limited to regular autopilot, which offers automatic steering on highways and adaptive cruise control.

The name of the Full-Self Driving package has been controversial. In October last year, the company stopped promoting the option, claiming that it was causing “too much confusion” for its customers. That’s understandable, since the Navigate on Autopilot feature it enables is a far cry from the “full self-driving” functionality implied. In spite of the criticism however, the option soon returned in February.

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2019-07-08 11:03:44Z
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Weaker growth will offset a Fed rate cut—so sell stocks, warns Morgan Stanley - MarketWatch

So we start the week with U.S. stock market indexes just a few steps away from all time highs.

That is even after Friday’s extra strong jobs data rattled some investors, who worried that the Fed could be deterred from cutting interest rates in a few weeks. But according to CME Group, that cut is happening.

Our call of the day though, kicks things off with a warning from Morgan Stanley which is “putting our money where our mouth is” and downgrading global equities to underweight from equal-weight.

Here’s why: ‘The most straightforward reason for the shift is simple—we project poor returns,” said Andrew Sheets and a team of strategists.

The S&P 500, MSCI Europe, MSCI Emerging Markets and Topix Japan indexes are currently only about 1%, on average, below Morgan Stanley’s current price targets—or their best guess for the indexes’ fair value. “There comes a point for every analyst where you need to change your forecast or change your view. We’re doing the latter,” wrote Sheets and team.

Morgan Stanley is expecting a rate cut, but Sheets argues history shows that when central banks cut because growth is weak, it is the weakness that matters more for stocks in the end. “If you don’t believe us, we have some European stocks from April 2015, shortly after the European Central Bank’s first QE program was announced, that we’d like to sell you”, he added.

The Stoxx 600 index of leading European shares is down 3.6% since April 1 2015.

Read: A strong economy and Fed rate cuts: The stock market wants to ‘have its cake and eat it, too’

Sheets and team are mindful of the “many ways we could be wrong”, Sheets wrote, with exhibit A being the chance that economic data could come in strong, and the Fed cuts rates anyway. That could lead to higher inflation expectations, and a boost for commodity prices, he added.

The market

The Dow YMU19, -0.21% S&P ESU19, -0.16%  and Nasdaq NQU19, -0.36% futures are down modestly after that Friday pullback on the stronger-than-expected jobs data.

Gold GCQ19, +0.50% rose decisively, oil US:CLN19 US:CLN19 is up modestly and the dollar DXY, +0.02% was down a little.

Europe stocks SXXP, +0.04% are flat-to-mixed, while Asia ADOW, -1.09% finished sharply down.

The chart

Is cash still trash? Our chart of the day from TopDownCharts.com shows how fund managers and others are already beginning to bake that expected Fed rate increase into their portfolios. Their allocations to cash are beginning to creep up from record lows.

TopDownCharts.com

Investor Asset Allocations — Cash Allocations

The buzz

A dark day for Germany’s biggest lender, as Deutsche Bank DB, +2.82%  unveiled the biggest restructuring probably of any bank since the aftermath of the 2008 financial crash. The troubled German giant—which once hoped to be Europe’s answer to Wall Street titans like J.P. Morgan or Goldman Sachs—is to reduce head count by 18,000 and call time on a big chunk of its global investment banking ambitions.

This earnings season, zero is the number to beat. Expectations couldn’t be much lower, reports Barron’s.

Meanwhile, good news for those hoping to take cryptocurrencies—to date largely the preserve of day traders and hedge funds—into the mainstream. Fidelity Investments has long been known as one of the keenest among the big mutual-fund managers on developing main-street crypto investments; now its non-U. S. sister company Fidelity International is following suit. Staff have been given a game that allows them to simulate trading crypto, with cash prizes for the winners. Sounds like fun, though we do wonder; why not crypto prizes?

And, of course, congratulations to the U.S. women’s soccer team, who look set to be rewarded for their World Cup victory with a ticker-tape parade in Manhattan.

Random reads

Two Americans were among those gored by bulls in Spain’s annual bull-running festival in Pamplona.

Meet the dog-owners using DNA tests to reunite their pooches with long-lost relatives.

And Bloomberg’s top-end wining-and-dining destination in the heart of London is experiencing a bit of a problem at weekends, when the city is largely deserted. Restaurateurs aren’t happy.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. Be sure to check the Need to Know item. The emailed version will be sent out at about 7:30 a.m. Eastern.

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https://www.marketwatch.com/story/weaker-growth-will-offset-a-fed-rate-cutso-sell-stocks-warns-morgan-stanley-2019-07-08

2019-07-08 10:27:00Z
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As Deutsche Bank Axes 18,000 Jobs, Bitcoin Offers a Powerful ‘Plan ฿’ - Cointelegraph

Deutsche Bank taking an axe to 18,000 jobs and winding down its investment banking arm paints a bleak picture of traditional finance at a time of booming growth for crypto.

As reported by Reuters on July 7, Deutsche Bank’s momentous decision will entail the bank exiting its equities sales and trading business — which had reportedly raked in €1.96 billion ($2.20 billion) in revenue in 2018. 

While retaining a small-scale equity capital markets business, DB also plans to rein in its fixed-income business — in particular, its rates trading desks — Reuters notes.

The move carries an expected toll of around 18,000 jobs and a 40% shrinkage of risk-weighted assets currently allocated to DB’s trading operations — representing €74 billion ($83.06 billion), and €288 billion ($323.5 billion) of leverage exposure as of Dec. 31, 2018, according to Reuters.

In a tweet published July 7, Morgan Creek Digital Assets co-founder Anthony “Pomp” Pompliano interpreted the news as a robust endorsement for bitcoin (BTC) adoption, remarking:

“Deutsche Bank plans to fire almost 20,000 employees. Bitcoin has no employees to fire. DB is built for the old world. And Bitcoin is built for the new world.”

In his own analysis of the ailing banking sector, eToro analyst Mati Greenspan proposed that DB’s move represents a broader policy failure by the stewards of global monetary policy, noting:

“This is the effect of prolonged zero interest rate policy. Central Banks are making it impossible for investment banks to turn a profit. Even the riskiest bonds around are yielding <2%. How can they be expected to make money from that?”

Greenspan’s opinion has today been echoed in rolling news from major U.K. broadsheet The Guardian, which in addition points to DB’s encumbrance with billions of euros of derivatives contracts. Many of these will purportedly be turned over to its newly-created “bad bank,” —  a so-called Capital Release Unit, tasked with managing the wind-down of DB’s investment banking assets.

Notably, Jim Reid — head of global fundamental credit strategy at DB — had remarked that central banks’ dovish policies were positively impacting “alternative” currencies such as bitcoin while hurting investment banks. He said:

“if central banks are gonna be this aggressive, then alternative currencies do start to become a bit more attractive."

Moreover, the fact that DB’s decision broke on a Sunday points to yet another Achilles Heel for traditional finance, according to VanECK digital asset strategist and MVIS director Gabor Gurbacs, who tweeted:

“Crypto markets are at least open 24/7 to act on news. In traditional markets some just have to wait until market open to get hammered on news that are public information. To me this appears to be a serious market structure problem! It’s time for plan ฿!”

As one former equities broker today told BBC radio, the Deutsche Bank revelation is viewed by many as an inevitable and belated wake-up to the aftermath of the 2008 crash — the very cataclysm that Satoshi wryly alluded to within the bitcoin genesis block over a decade ago.

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2019-07-08 09:08:00Z
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Deutsche Bank shares turn negative as lender gets ready for major overhaul - CNBC

Deutsche Bank shares turned negative after initially jumping nearly 4%  in early morning trade on Monday as the German lender announced a mass restructuring program over the weekend. In one of its boldest overhaul, the bank will see 18,000 jobs cut by 2022 and the closure of its global equities sales and trading business in a bid to improve profitability.

The bank expects the sweeping reforms, which also involve the creation of a 74 billion euro ($83.05 billion) "bad bank", to cost 7.4 billion euros by 2022. With second quarter results due on July 25, Deutsche is expected to report a net loss of 2.8 billion euros.

Deutsche Bank chief financial officer James von Moltke told CNBC's Annette Weisbach on Sunday that this will be the last strategy overhaul, aiming to reduce global headcount to around 74,000 and cut adjusted costs by a quarter to 17 billion euros.

Several sources have told CNBC that layoffs at the bank's offices in New York begin on Monday.

The German bank's decision to scale back on investment banking comes just two days after its investment banking chief Garth Ritchie stepped down by "mutual agreement."

Deutsche shares have risen 16% over the past month, bouncing off an all-time low in early June after CEO Christian Sewing called for "tough cutbacks" at a contentious shareholder meeting. However, the multi-year decline is evident in a share price at Friday's close of 7 euros, as opposed to 112 euros at their pre-crisis peak.

The tumbling share price has reflected the bank's long run of legacy scandals, many of which relate to anti money laundering failures, along with the collapse of merger talks with domestic rival Commerzbank, which may have eased pressure to trim or hive off its investment banking arm.

About time

Stephen Isaacs, chairman of the investment committee at Alvine Capital management, told CNBC's "Squawk Box Europe" on Monday that it was "about time" Deutsche Bank took action to improve profitability.

"Every other European bank, I'm afraid to say, has had to face up to the reality that they can't compete with the Wall Street players - go UBS, Credit Suisse and even the British banks - come on guys, it is extraordinary that it has taken this long, and only in the case of a complete collapse in the share price, and starting to see some of their key clients moving away," Isaacs said.

Isaacs said that while eventually the reforms will work for Deutsche Bank, they will be "far more painful" and the "provisions that they've talked about are not nearly adequate."

"All sorts of issues are going to crawl out of the woodwork, I'm afraid. Getting rid of all those jobs is very expensive, particularly in Europe, particularly in Germany, it's going to be very difficult," he said.

"Ultimately, the strategy of effectively doubling down on the German corporate market, just at a time when maybe the German economy is really rolling over, that in itself is not a key to profitability."

Isaacs went as far as to suggest that embattled chairman Paul Achleitner, who survived an attempt to oust him at a contentious shareholder meeting in May, should resign over the crisis.

—CNBC's Annette Weisbach and Spriha Srivastava contributed to this article.

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2019-07-08 07:34:18Z
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