The latest announcement last Wednesday that Deutsche Bank AG (USA) (NYSE:DB)’s profits have plunged by 98% was not received well in all quarters. The bank that has been struggling the past few years and has shareholders worried, despite the commitment of the bank’s management to turnaround its fortunes. This has been attributed to the weak performance in trading, investment banking, as well as other core areas that determine the bank’s profitability.
Generally, the net income came down to worrying 20 million-pounds from an income of 818million-pounds 12 month ago. This was a little better than the projected 22 million-pound loss projected; nevertheless, the net revenue still plummeted by 20% (7.4 billion-pounds). As a result, the lenders share value dropped by 5% Wednesday morning the lowest in 2 weeks period.
Strategy for recovery
The Frankfurt bank is one of those that have been hit hard, and its try to gain ground by cutting on costs, finding new clients, as well satisfying existing ones. However, there is concern on investor side on the capital to cushion against any eventuality. The ongoing investigation which can lead to the bank being slapped fines, is also a cause of concern that need to be addressed fast.
IMF Dubbed Deutsche Bank Riskiest In The World
The fact that international money market is intertwined with all economies, trouble with the biggest lender in Germany is something that calls for quick action. Last month, IMF officials said that failure of the bank can lead to a ripple effect across the globe throwing the money market into disarray. On this statement, John Crayan, banks CEO, said that the bank is trying to do its best to cushion against any future crisis by solidifying and beefing up its capital base.
There are critiques in the banking sector who believe that the only problem with the institution is that it has tried to implement so many leverage strategies. Nevertheless, they said that the bank has two options to consider; increase capital base or cut assets. Of which, both are tricky as getting investors will be pretty difficult as most want good returns, while market conditions are not conducive for the bank to sell any properties at the moment.