Banks

BoE stress tests: all you need to know

The Bank of England has released the results of its latest round of its annual banking stress tests and its semi-annual financial stability report this morning. Used to measure the resilience of a bank’s balance sheet in adverse scenarios, the stress tests measured the impact of a severe slowdown in Chinese growth, a global recession […]

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Economy

Draghi: Eurozone will decline without vital productivity growth

It’s productivity, stupid. European Central Bank president Mario Draghi has become the latest major policymaker to warn of the long-term economic damage posed by chronically low productivity growth, as he urged eurozone governments to take action to lift growth and stoke innovation. Speaking in Madrid on Wednesday, Mr Draghi noted that productivity rises in the […]

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Currencies

Asia markets tentative ahead of Opec meeting

Wednesday 2.30am GMT Overview Markets across Asia were treading cautiously on Wednesday, following mild overnight gains for Wall Street, a weakening of the US dollar and as investors turned their attention to a meeting between Opec members later today. What to watch Oil prices are in focus ahead of Wednesday’s Opec meeting in Vienna. The […]

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Banks, Financial

RBS emerges as biggest failure in tough UK bank stress tests

Royal Bank of Scotland has emerged as the biggest failure in the UK’s annual stress tests, forcing the state-controlled lender to present regulators with a new plan to bolster its capital position by at least £2bn. Barclays and Standard Chartered also failed to meet some of their minimum hurdles in the toughest stress scenario ever […]

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Banks

Barclays: life in the old dog yet

Barclays, a former basket case of British banking, is beginning to look inspiringly mediocre. The bank has failed Bank of England stress tests less resoundingly than Royal Bank of Scotland. Investors believe its assets are worth only 10 per cent less than their book value, judging from the share price. Although Barclays’s legal team have […]

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Categorized | Banks

Romance is dead for Deutsche Bank in UK


Posted on September 27, 2016

File photo of workers walking past the London headquarters of Deutsche Bank in the City of London...Workers walk past the London headquarters of Deutsche Bank in the City of London, Britain in this May 19, 2015 file photo. Deutsche Bank posted a 20 percent rise in revenue at its lucrative bond trading business in the third quarter, helping to take the sting out of its previously announced record 6 billion-euro ($6.6 billion) group pre-tax loss. REUTERS/Toby Melville/Files©Reuters

Germanic fatalism should not be taken to extremes. One thinks of Goethe’s romantic hero Werther, who shot himself because he couldn’t get a date. Resignation to the whims of fate is of greater utility to employees of Deutsche Bank in London. Their numbers are set to shrink.

The glumness of Deutsche bankers has intensified with a $14bn ransom demand from the US Department of Justice in recompense for alleged misdeeds in mortgage-backed securities. The performance of the investment bank, based in London and New York, has been patchy. This year, Deutsche dropped out of the top five of world investment banks in a ranking from Coalition.

    Half-year results, meanwhile, showed net income had fallen from €1.1bn to €423m at the global markets division that is home to Deutsche’s big debt-trading business.

    Deutsche is supposed to be executing a simplification of the kind that won UBS plaudits and a superior return on equity. Despite this, the lender now employs 11,600 in the UK, including contractors, 1,600 more than two years ago. Perhaps, like other banks, it has to hire a couple of compliance officers for every fee earner it fires.

    Fewer staff are likely to be based in Britain after the UK leaves the EU. The Bank of England has whispered that Deutsche could continue to operate as a branch. But that favour would depend partly on the goodwill of European functionaries, some of whom are combative, particularly after lunch. Deutsche is hardly in a position to put up the capital needed to support London as a subsidiary.

    The bank might separately need to move euro-based securities operations onshore. Securities in other currencies might follow. Old-timers recall earlier trials of split-site trading went badly.

    There are worse things than relocating to Frankfurt. A colleague lived there happily, though he keeps quiet about it for fear of being thought middle-aged. Goethe, we should recall, retreated to Weimar, youthful ardour spent. Pragmatism beats romanticism. The dream of a European challenger in world investment banking increasingly smacks of the latter.

    Crowdsourced credit hit

    Social media gives wings to the nerdiest conversations — as illustrated by a panic over the finances of Monarch, the airline owned by turnround group Greybull. Thus, the crowdsourced credit alert has become the latest internet threat to businesses.

    Monarch Airlines promises ‘significant investment’

    File photo dated 17/08/09 of a Monarch plane landing, as Monarch Airlines has been forced to deny "negative speculation" that the firm is in financial trouble.

    Company seeks to reassure passengers after speculation about its finances

    When aircraft anoraks compared Monarch’s flight schedules with charters by the Civil Aviation Authority, they concluded that the regulator might be preparing to airlift stranded holidaymakers home. Twitter users leapt to the conclusion Monarch would declare bankruptcy on Monday. The airline was forced to state it was “trading well”, will make underlying earnings of £40m this year and awaits a cash injection from stakeholders.

    Digitally empowered plane nerds had put 2 and 2 together to get 4 ½. The CAA has evidently been in discussions with Monarch about relicensing the ATOL-protected status of its flights, without which some passengers would book elsewhere.

    The CAA may be worried weak trading is depleting cash reserves, making Monarch less creditworthy. The airline has specialised in destinations whose popularity has been damaged by terrorism fears. Positive underlying earnings can, meanwhile, be accompanied by a bottom-line loss. Monarch’s profits before tax last year were £19m, much lower than profits before nasties of £75m.

    Social media, we learn, exposes businesses to criticism worse than sarcastic music videos that go viral. United Airlines became the subject of one of these after smashing a Canadian singer songwriter’s guitar (haven’t we all longed to do that?). Bankruptcy rumours are a lot more dangerous. By spooking customers, lenders and insurers, they can turn into self-fulfilling prophecies.

    Brut force

    Gemfields to boost output after annual profits almost double

    ...Ian Harebottle, CEO of Gemfields. Photograph: Rosie Hallam

    Ruby and emerald miner plans to raise demand for gemstones through marketing

    Gemfields is out to do for coloured rocks what De Beers did for diamonds, writes Kate Burgess. It wants rubies and emeralds to be BFFs to modern Marilyns and is on a mission to impose order on the production of beryls and corundums. It owns among the world’s largest mines and has set up a system for grading and auctioning stones. As a result the price of rough emeralds has risen 70 per cent a year in seven years.

    Gemfields will struggle to catch up with De Beers, though. Before watchdogs cut De Beer’s stranglehold on the market in 2008, the diamond group was spending perhaps $300m a year on spreading the message that solitaires are everyone’s rock of choice. Last year, Gemfields spent just $15m on marketing.

    Gemfields owns Fabergé, since the 1970s familiar from the aftershave Brut, whose slogan was “splash it all over”. That applies equally to the marketing costs Gemfields will have to countenance.

    jonathan.guthrie@ft.com
    Gemfields: kate.burgess@ft.com