Deutsche Bank AG (DB) probably saw profit decline 34% in the first quarter, based on a FactSet survey, underscoring the troubles faced by Germany's largest lender as new CEO Christian Sewing takes over.
A report due out Thursday from the Frankfurt-based Deutsche Bank could show that profit fell to 377 million euros in the period, or 28 cents a share, according to the FactSet survey of 27 analysts. Return on tangible equity -- a key measure of bank profitability -- was an estimated 4.7%, less than a third of the level reported by U.S. rival JPMorgan Chase & Co. (JPM) , the survey showed.
Deutsche Bank is coming off three straight years of net losses totaling more than $10 billion and an ongoing erosion of market share in its once-dominant investment-banking and trading unit. Former CEO John Cryan's attempts to turn around the litigation-plagued lender ended earlier this month when the bank's supervisory board, led by Chairman Paul Achleitner, replaced him with Sewing, who had been overseeing the private- and commercial-banking division.
The company has seen its share of global investment-banking and trading revenue shrink in recent years, and that trend continued in the first quarter, based on estimates by the brokerage firm RBC Capital Markets.
Revenue from trading stocks, bonds, commodities and currencies probably fell 11% from a year earlier, compared with an average gain of 2% for nine global banks tracked by RBC, according to an April 8 report. Fees from advising on mergers and underwriting stock and bonds probably fell 21%, compared with an average industry decline of just 2%, according to the report.
When the bank announced Cryan's departure, it also said that Co-President Marcus Schenck, a former Goldman Sachs Group Inc. (GS) executive who helped oversee the investment-banking division, would leave.
Speculation has mounted that Sewing may make drastic cuts in the trading and investment-banking unit, as analysts including Viola Risk Advisors' David Hendler say the company needs to undergo a major restructuring to win back investors' confidence.
One possibility could be for Deutsche Bank to significantly curtail its global ambitions in trading and investment banking and concentrate on its strength as a European-focused corporate lender and brokerage firm, according to Hendler.
Bloomberg News, citing people familiar with the matter, reported this week that Sewing is weighing extensive cuts to the lender's stock-trading business. The details could be announced as soon as Thursday, according to the report.
A Deutsche Bank spokesman declined to comment.
The lender's shares have tumbled 29% in the past year, even as global rivals JPMorgan and Bank of America Corp. (BAC) have seen their stocks rally more than 20% each.
Cryan's main strategy had been to cut costs and resolve legacy troubles, such as mortgage-related legal costs, according to Hendler. Even so, the bank earlier this year had to raise its estimate for 2018 costs by 4.5% to 23 billion euros, due to the delay or suspension of planned business disposals.
In February, the bank hatched a plan to fire 250 to 500 employees in its trading and investment-banking division -- just weeks before annual bonuses were paid out -- to save money that could be paid out to top performers.
Cryan told investors that cost-cutting was a "critical component of improved and sustained profitability," after saying last year that the bank was "investing in people."