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1st February 2019

Darkening Business (DB) Prospects..what to do now?| Trade Ideas

Light at the end of  the tunnel or..

Deutsche Bank (DB) reported Q4 (and full year) 18 results on Friday morning and they were hardly inspiring. The bank continues to underperform its rivals driven by what we believe to be is a broken business model, excessive reliance on FICC and very high cost base. The Q4 performance demonstrated the scale of the problems given the very difficult market conditions and drop in trading volumes.

And for all its efforts in 2018, the bank generated net income of just EUR 267 million translating to a meagre RoTE of 0.5%.  On the positive side though, the bank generated annual profits for the first time since 2014.  With a cost-to-income ratio of almost 93%, it seems that the bank needs to do radical restructuring and substantially move away from the FICC business and focus entirely on corporate banking and wealth management.  In the meantime, what should AT1 investors do?

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