Deutsche Bank secures a breather

Let's assume a soccer club with a big name is in the middle of a fight to avoid relegation. And all of a sudden, it wins an important match. The coach tells reporters his team's efforts are picking up momentum, adding the players would now have more self-confidence.

The situation at Deutsche Bank isn't that much different. Germany's No. 1 lender is also facing relegation, if you will. The Frankfurt-based bank has long been kicked out the Champions League, but they're still in the world's top 100, positioned somewhere towards the end of the table. Deutsche has indeed seen better days, and it has said good-bye to its erstwhile high-flying ambitions.

The road ahead

In the summer of last year, the bank's "head coach" was fired, and a new CEO, John Cryan, took over the reins. Since then, he's fighting an uphill battle against Deutsche's legacy problems. He's already replaced quite a number of players, but there's no sight yet of a powerful new roadmap. Where does he want to go with his new players? What are the long-term objectives? Which business segments does he want to keep, and which will he need to dump along the way?

All of those questions remain unresolved, with the bank's scandalous past haunting the lender ever so often. Deutsche Bank's stock dropped to 10 euros per share at one time, down from around 100 euros in its days of glory. Investors keep turning their backs on Deutsche in droves as there's next to no trust left.

No effective clearing

And so it came as no surprise that analysts had expected Deutsche to post negative results for the third quarter. But lo and behold, the bank on Thursday reported an unexpected Q3 pre-tax profit of 619 million euros ($677 million), leaving it with bottom-line earnings of 278 million euros. This prompted John Cryan to talk of the strength of his team. But there wasn't any talk of a turnaround as he knew the bank was nowhere near that.

About a year ago, Cryan had to report a record loss for the bank - 6 billion euros in a single quarter, which looked hard to beat by anyone else. Seen against this background, the 278 million euros on the plus side reported on Thursday are really something to be happy about, although the figure pales beside the mega profits logged in the good old days.

A closer look at the latest earnings report reveals the magnitude of problems Deutsche is still confronted with. There's the US Justice Department's looming fine of up to $14 billion. The bank has been trying to get this figure down, but it's hard to believe there'll be any movement on the issue before the US presidential elections.

As long as Cryan doesn't exactly know how big the fine will eventually be, he'll be struggling to present a new long-term strategy.

Reserves melting down

But this is exactly where Deutsche finds itself in a bind. Influential shareholders have long criticized the lender for not yet having presented a viable business concept. Sure, the bank still sits on 200 billion euros in cash reserves, although those reserves have decreased by 23 billion euros lately.

"Trust is at the core of everything else," Deutsche's slogan once read. But the chief executive had to admit that the bank's image had been massively tainted in the eyes of investors and clients.

For head coach John Cryan and his team there's only one sensible thing to do now - keep fighting and come up with a genuine match schedule.

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