Deutsche Bank Hits Low as JPMorgan Urges End to ‘Tinkering’

(Bloomberg) -- Deutsche Bank AG fell to a fresh record low Monday amid a broad-based slump in European bank stocks, adding to pressure on Chief Executive Officer Christian Sewing to come up with a more decisive solution for his ailing investment bank.

With concerns about a widening trade war weighing on global stocks and clouding the outlook for higher interest rates, the lender fell as much as 4.7% in Frankfurt trading. That left the shares below 6 euros ($6.70) for the first time, while the cost to protect against a default in the bank’s debt jumped.

The CEO has promised to present a new restructuring plan after his previous one, unveiled last year, failed to return the investment banking division to growth and profitability. He told shareholders he’s ready to make “tough cutbacks,” notably in equity trading, to restore market confidence following the breakdown of takeover talks with Commerzbank AG. Sewing aims to unveil the new plan by the end of July, people familiar with the matter have said.

“We don’t envy CEO Sewing, who has inherited the toughest job in European banking, but we feel he is up to the challenge to take action against the status quo,” JPMorgan Chase & Co. analysts led by Kian Abouhossein wrote in a note.

The new plan will include deep cuts to the equities trading unit, other people familiar with the matter have said. Sewing last month highlighted several areas in the trading divisions that he would like to keep but didn’t mention rates and equities trading. The bulk of the cuts is likely to happen across U.S. rates and global equities, JPMorgan wrote in the note.

Deutsche Bank “needs to stop ‘tinkering’ with its restructuring efforts,” the analysts wrote. “The next step has to be an objective decision on what businesses can be closed, assets reduced and cost reduction measures needed to bring the group in line with peers.”

The long slide in the shares -- they’re down more than 90% from their peak before the financial crisis -- has frustrated investors, with the stock trading well below the value of the bank’s assets. Deutsche Bank currently has a price-to-book ratio of 0.18, less than any other large bank in Europe and one of the lowest in a historical comparison.

Deutsche Bank’s euro contingent-convertible bonds fell on Monday to their lowest level since January, while the price of credit protection on the bank’s subordinated debt jumped to the highest since December 2016.

--With assistance from Vivianne Rodrigues.

To contact the reporter on this story: Steven Arons in Frankfurt at sarons@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Christian Baumgaertel, Ross Larsen

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