Case: Deutsche Bank

By Rishabh Kapoor
Deutsche Bank founded in 1870 with the objective to carry out all the banking
businesses and to promote and facilitate relationship between Germany and
European countries and other overseas markets. Deutsche Bank started its
operations as a universal bank with focus on being a one-stop-shop for its
customers.
Because of growing competition, Deutsche tried to inflate its EPS, year after year till
2008, by increasing leverage. This clubbed with relative narrower ROA and Margins
coupled with the 2008 financial crisis caused Deutsches shareholders a loss EUR
7.6 per share. Under pressure from investors, Deutsche tried to delever its balance
sheet since then.
In order to increase the scrutiny of banks and to protect investors interest Basel III
was implemented. As per new requirements tier 1 capital need to be 9.5% to 13.5%
of risk adjusted assets. To meet these capital requirements Deutsche needs to
either raise fresh capital or sell of certain assets.
The main problem amidst this issue in the declining profitability and growing
investors discontent with board.