Deutsche Bank CEO tells staff he’s ‘sick and tired’ of bad news

“But there’s no reason for us to be discouraged. Yes, our share price is at a historic low. But we’ll prove that we have earned a better valuation on the financial markets.

“We’ve achieved a lot we can be proud of. We have reduced risks by billions of euros, we have strengthened capital and we have reorganised our bank. We can tick those boxes. Now we need to look forward.”

Downgrades and cartel cases

Ratings agency S&P Global downgraded Deutsche Bank’s long-term credit rating from A- to BBB+ on Friday, citing the bank’s new restructuring plans as the main motivation.

Sewing last week announced plans to cut 7,000 investment banking jobs. S&P said the “deeper restructuring” entails a “non-negligible execution risks.”

“The bank appears set for a period of sustained underperformance compared with peers, many of whom have now finished restructuring,” the ratings agency said.

A spokesperson for Deutsche Bank said: “We appreciate S&Ps statement that ‘management is taking tough actions to cut the cost base and refocus the business in order to address the bank’s currently weak profitability.’ We note that Deutsche Bank’s non-preferred senior unsecured debt rating of BBB- is reaffirmed.”

Sewing emphasised in his memo to staff on Friday: “S&P does not base its decision on any doubts about the strength of our balance sheet. Rather, we are quite simply not profitable enough.”

Separately, Reuters reported on Friday that Australian prosecutors are criminal cartel charges against the country’s third-biggest bank and underwriters Deutsche Bank and Citigroup over a $2.3 billion share issue. All three parties deny any wrongdoing.

A spokesperson for Deutsche Bank confirmed to Business Insider that the bank expects to be charged and said: “Deutsche Bank intends to vigorously defend those charges. Given this is a legal matter, we will not be providing any further comment at this time. We take conduct matters extremely seriously and have cooperated fully with the ACCC during the investigation process.

“Financial markets are highly regulated under the Corporations Act and ASIC market integrity rules. The bank believes it and its staff acted responsibly and in a manner consistent with those rules.”

‘The problems we face are not a question of financial soundness’

The S&P downgrade and looming Australian charges come less than 24 hours after the Wall Street Journal reported that the Federal Reserve last year labelled Deutsche Bank’s US arm as in a “troubled condition.” The Financial Times also reported that the Federal Deposit Insurance Corporation added Deutsche Bank’s US subsidiary to its list of “problem banks.”

A spokesperson for Deutsche Bank told Business Insider: “As a matter of policy, we do not comment on specific regulatory feedback.”

They added that Deutsche Bank “is very well capitalized and has significant liquidity reserves” and its US subsidiaries have “a very robust balance sheet.”

“We have previously indicated that our regulators have identified various areas for improvement relating to our control environment and infrastructure,” the spokesperson said. “We are highly focused on addressing identified weaknesses in our US operations.”

Sewing emphasised the financial strength of Deutsche Bank’s US operations in his memo to staff and said: “The problems we face are not a question of financial soundness, but involve identified infrastructure and control deficiencies, which we are tackling.”

Deutsche Bank shares closed down almost 7% in Frankfurt on Thursday. Shares are up 2.5% on Friday morning, with analysts at Bank of America suggesting Thursday’s sell-off was overdone.

You can read Sewing’s full memo here.