Category Archives: Day Topic

Where are we headed?

Markets are still looking at the term of the debt repayment between Greece and its creditors on 5 June. Market observers see a deal reachable and a default unlikely to happen. Greek debt resolution will drive all major European Markets up. The week opened under the light of volatility, everything that comes out of the discussions between Bruxelles and Athens may invert any secured daily trend. TWO WORDS: BE CAREFUL. Today, the Finance Minister of Spain Luis de Gundos showed confidence in the reach of a deal and categorically denied any possible GREXIT. Having in mind the peculiarities of European Politics, it is my opinion that surprise can come up at the last moment. Be prepared. Macro indicators were also on the spotlight yesterday. CPI started to increase again in the Euro Area, and Euro strengthened against all currencies. EUR/JPY reached multi-month high, and is trading around 1:138.

German DAX approached yesterday the support line in area 11170, settling a minimum intraday at 11271. Today, the index is performing an interesting pullback, which, in my opinion, can ignite a new bullish break up, if the Greek debt deal would be sealed. I have long positions in DAX through a BNP Paribas Turbo Certificate. For me, Germany is the place to bet in the short term, and Italy in the long run. The problem with German Equities is that they are already pricy. I do not feel comfortable in making long-term predictions on Germany. What I see is DAX at 12000 if Greece may move on from the 5 June repayment. Italy, instead, is still undervalued. Italian Equities are down more than 50% from 2000 levels, and new structural reforms are taking place. Italian Banks are the preferred industry to bet one. I would wait a correction to enter in the FTSEMIB.

DAX

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Day Topic: Greece Roller Coaster

European financial markets’ fluctuations have been strongly correlated to the outcome of the deal making process between Greece and its creditors. Yesterday, Wednesday 27 May, market makers bet on a positive final resolution over the Greek debt affair, pushing upward all major indexes. FTSEMIB reported a 2.29% daily gain, settling at 23861 and approaching the resistance point in area 24000. Today, very few minutes ago, Dow Jones Newswires reported a news where IMF authorities expressed their expectations of a Greek debt repayment. We have to remember that the deadline of the repayment is on 5 June. Today, indexes are showing some weakness due to the cloudy future of the Greece’s solvency.

Worldwide, between yesterday and today, global markets followed the bullish momentum of Europe and reported gains. Nikkei reached new multi-year highs, closing at 20473, +0.17%. NASDAQ performed a long green candle yesterday reaching multiyear high at 5106, +1.47%.

Nasdaq

Nikkei225

Day Topic: Deutsche Bank Annual General Meeting, 20/05/2015

Today in Frankfurt the General Meeting of Deutsche Bank took place, more than nine thousands shareholders signed in for the event. At the very heart of the discussion there was the 2020 plus strategy agenda, the program has been discussed throughout the past years with also some extreme options considered, such as the exit of the firm from the investment banking industry. Alongside the topics related to the future strategy the result of the 2015 strategy have been presented and an important part of the presentation has been dedicated to the latest litigation for misconducts that have shaken the banking sector.

Looking at the past four out of six goals from the previous plan have been reached by DB management, the firm have experienced an increase of capital strength (result supported also by the first ECB stress tests) and a more efficient network, with a more focused approach on the company’s core areas (investment banking, corporate and private banking, retail banking and asset and wealth management). The management in 2012 has also launched a cultural change programme that is showing its first results, however fraudulent behaviours from employees are still taking place and they are generating a big chunk of the legal fees. Costs and legal fees are the areas where the management missed the expected improvement and they are the bridge between the past and the future strategies. For the future DB is expecting to tackle even harder its costs structure with a reduction of the IB division balance sheet and the closure of some branches around the world in order to allow a better focus on attractive areas. On the retail banking side the company is planning to split up Deutsche retail division and Deutsche PostBank given the low level of synergies between the two customer clusters and new capital legislation.

The Management has been put under pressure by unsatisfied shareholders judging results not in line with their expectations. The Co-CEO Anshu Jain in now the direct supervisor of the restructuring plan, which will follow the pillars of the new strategy plan as defined in the meeting. Management have been incapable of securing a good stock return the last year. Deutsche Bank’s shares are one of the worst performers among peer in the last year. The new strategy will require a massive €3.5bn cost-cutting program.

Financial performance of 2014 as also been presented to the shareholders, DB has hugely increased its pre-taxes and after-taxes results for the period with an improvement in revenues in all the core business areas but the achievements are also due to a decrease in legal fees and loan-loss-provisions for the previous period. However in the first quarter of this year litigation expenses are already bouncing back to historical highs mainly for the LIBOR and exchange rates scandal.

By

Andrea Mangone, Master Student

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