Deutsche Bank should scale back US business: JPMorgan

Bloomberg

Deutsche Bank AG needs to scale back its US operations and focus on serving European companies to unlock capital and improve returns, according to analysts at JPMorgan Chase & Co.
The US business “consumes material balance sheet resources” while suffering from “persistently low profitability,” Kian Abouhossein and Amit Ranjan wrote in a note to clients on Wednesday. The alternative would be to do nothing and hope for a better environment, which would leave the bank at risk of a “confidence issue” should markets go the other way, they said. It’s “time to change strategic direction,” the analysts wrote. The US business is “in need of shrinkage.”
Deutsche Bank is taking a close look at the US operations as part of a fresh review of its trading businesses, Bloomberg News reported last week. Chief Executive Officer John Cryan is examining activities where Europe’s largest investment bank is trailing competitors to determine if it should try to win back market share or exit, said people familiar with the review, dubbed Project Colombo.
The Frankfurt lender’s US business consumes at least 10 billion euros ($12.3 billion), or about 20 percent, of Deutsche Bank’s common equity, the analysts wrote. Shrinking the US equities and corporate clients units would be key to increasing profitability and freeing up capital, they said.