Deutsche Bank - too pretentious?

Dear Reader,

My first blog entry will be about one story that caught my eye, covered by two major financial newspapers in Germany (FAZ) and the UK (FT).

Since mid 2009, the market situation is getting more encouraging to mergers and acquisitions and some big multinationals and banks have already made a move in that direction. M&A, which was undergoing a downturn during the financial crisis between 2008 and 2009, is coming back on the headlines of the newspapers.

After the crisis we see that mostly investment banks are announcing record net incomes allowing them to analyze the market and acquire weak competitors, which are still struggling with the side affects of the crisis.

The story: Deutsche Bank made an offer of €10.2bn to take over Deutsche Postbank in the past days. The offer document, which was revealed today was showing a participation of already €2.3bn creating a deficit in Deutsche Banks portfolio for the upcoming 3 months. Additionally the investment banking division is generating less profit, which lead to a fall of roughly 4% in shares, although the CEO Josef Ackerman was lining out, that this acquirement is a strategy to strengthen the banks retail division. Check out the sources at the bottom for more information.

(Source: AFP, 2010)

Who is Deutsche Bank?

The Deutsche Bank is Germanys largest Bank and one of Europe’s big players in the banking sector. Last year Deutsche Bank made a net income of €1.4bn only in the third quarter. It is also one of the leading global banks in the trading of fixed-income products and foreign exchange.

(Source: FAZ)

The reason why this story caught my interest is the complete different structure in both articles. On the one hand the Frankfurter Allgeimene being more precise, but also more confusing by mentioning a lot of numbers, and actions that had been taken before. On the other hand there is the straight to the point Financial Times. Looking at the story the most important part seems to be the fall in shares that the Deutsche Bank suffered through the announcement. The FT is mentioning this point at the beginning of the article making it easy to filter out the important information. The FAZ is shifting this information to the end by also giving you the impression to hide it in the chaos of numbers.

The first question that came to my mind was: Is the domestic press protecting own companies, trough hiding information by mentioning it on the side? ...a question worth thinking about, because that is not the first time that I came across to such phenomena.

(Source: http://www.toonpool.com/cartoons/Ackermanns%20Rettungsschirm_34665)

(Cartoon is showing how a Post worker is throwing an umbrella to rescue Ackermann)

Another aspect that I would like to point out is referring to the title of this entry. Deutsche Bank, Germanys largest bank as mentioned above is too dependent on the investment division, which is very volatile, as the bank also gets to feel right now. Being dependent on such a volatile division and making an offer in this category is considered pretentious in my point of view and will or put the company already in trouble. When it comes to a long-term affect, of course the bank could see improvements in the retail sector, but looking at the short term the company will struggle, which is already predicted to at least the upcoming three months. By reading these kind of news sometimes I got the feeling that banks, which are considering themselves as strong and healthy are making too fast decisions, when seeing a good opportunity on the market. This wrong, or lets stay with too fast decision will always come back on the employees. Job or wage cuts or even division restructuring are all different aspects influencing them. Therefore is it not to arrogant from CEOS to jump into opportunities by putting the company into risk?

Regards,

E.V.

Sources:

1. FT

http://www.ft.com/cms/s/0/5bfae288-c5b5-11df-ab48-00144feab49a.html

2. FAZ

http://www.faz.net/s/RubD16E1F55D21144C4AE3F9DDF52B6E1D9/Doc~E9385548ECE7C48E6BAC5B8F95C7CF932~ATpl~Ecommon~Scontent.html

3. Donaukurier


http://www.donaukurier.de/nachrichten/wirtschaft/D-Banken-Finanzen-Unternehmen-Uebernahmen-Deutsche-Bank-kann-Postbank-uebernehmen;art154664,2352034

4. FT

http://www.ft.com/cms/s/0/601c6480-f94b-11df-a4a5-00144feab49a.html