Currencies

China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

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Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

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Banks

Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

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Currencies

China stock market unfazed by falling renminbi

China’s renminbi slump has companies and individuals alike scrambling to move capital overseas, but it has not damped the enthusiasm of China’s equity investors. The Shanghai Composite, which tracks stocks on the mainland’s biggest exchange, has been gradually rising since May. That is the opposite of what happened in August 2015 after China’s surprise renminbi […]

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Financial

Hard-hit online lender CAN Capital makes executive changes

The biggest online lender to small businesses in the US has pulled down the shutters and put its top managers on a leave of absence, in the latest blow to an industry grappling with mounting fears over credit quality. Atlanta-based CAN Capital said on Tuesday that it had replaced a trio of senior executives, after […]

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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