There’s been lots of schadenfreude, to be sure. The cocky burghers of Frankfurt have been keen to lure the best talent from London – some in the City will have been enjoying watching the iconic bank humbled by skittery markets and past misdeeds.
And even the Greeks have been enjoying a joke at the Germans’ expense. The central bank chief Yannis Stournaras told reporters (tongue in cheek?) that Greek banks were immune to any fallout from the Deutsche woes.
But the reality is that Europe’s financial markets are made deeper and more efficient by competition. For Deutsche Bank to shrink down to a German equivalent of Royal Bank of Scotland would not only damage markets, it would damage the companies and savers who at the end of the day use its services.
The alarm over the fine for pre-crash mortgage misdeeds isn’t really the underlying problem. The real problem is that the bank’s core operations have been steadily losing competitiveness against US rivals, most notably JP Morgan, for years.
Chief executive John Cryan was brought in to make the tough decisions. But tough decisions have yet to be made. He’s still working to the plan drawn up by his predecessors Anshu Jain and Jürgen Fitschen, which in itself was weak medicine.
Contrast Cryan with that other new bank CEO, Tidjane Thiam at Credit Suisse, who seems to make three tough decisions before breakfast. There’s real pain from job losses but what will hopefully emerge at Credit Suisse is a bank which is not only stable but will have areas of strength that may even allow growth.
A bailout of Deutsche would be a final, grim humbling beyond belief. But at least then the tough decisions would be taken – possibly not by Cryan.
The current road isn’t very scenic. In the absence of a eurozone economic miracle, operating profits are likely to be lacklustre for years and wiped out, year in and year out, by restructuring charges.
There’s an irony in Frankfurt’s campaign to lure staff from London. There’s a good chance it will be successful, probably only modestly. But none of that would make up for the loss to the City if Deutsche Bank doesn’t return to health.
Frankfurt may welcome London executives, but what it really needs is its local champion.