Deutsche Bank slams EU regulators for stifling bank growth

Deutsche Bank is trading some 88% below its peak just before the financial crisis, while JPMorgan Chase & Co and Goldman Sachs Group have hit record highs

Deutsche Bank CEO Christian Sewing has hailed the EU for making banks safer, but said tight regulation has hindered M&A activity.

Deutsche Bank chief executive Christian Sewing has said Europe has made large banks safer after the financial crisis, but failed to create conditions for them to consolidate and grow, hampering their ability to compete with international peers.

“It was right and remains right to regulate large banks particularly carefully,” Mr Sewing said at a virtual conference.

“But, we have done much in Europe to keep banks from getting big. That’s a questionable course,” he said, highlighting fragmented regulation as a key reason.

Bank executives across Europe have been urging politicians to complete their project for a banking union, after losing market share to Wall Street peers in the wake of the financial crisis.

While the bloc has unified bank oversight and handles failed lenders jointly, it’s been unable to create a common deposit insurance system that would make cross-border mergers easier.

The market valuation of Europe’s largest banks - including Deutsche Bank - is a fraction of their US peers, and the German lender’s stock price in particular has suffered, trading some 88% below its peak just before the financial crisis.

At the same time, banks such as JPMorgan Chase & Co and Goldman Sachs Group have hit record highs.

“What are we supposed to do in view of those valuation gaps?” Mr Sewing asked in his speech at the Handelsblatt banking summit.

“We need to strengthen Europe’s internal market as quickly as possible, especially for services. That includes a banking and capital markets union.” Mr Sewing, who has exited equities trading and is cutting thousands of jobs to restore profitability, also said he was confident the lender would reach its targets for next year.

While he didn’t directly address allegations of greenwashing against Deutsche Bank’s asset management arm DWS Group, he said “more sustainability in the finance industry” means “we have to work on ourselves.”

“We will only be able to use the best conditions if we ourselves change - and I’m speaking first and foremost about our own company,” Mr Sewing said. 

“This is about culture, it’s about leadership culture,” he added.

DWS is the subject of investigations in the US and Germany for allegedly publishing puffed-up claims about its ESG commitments.

-Bloomberg