5. Deutsche's woes reach Wall Street
Deutsche Bank and Citigroup have a lot in common. The two enormous lenders have taken advantage of their international reach and their massive balance sheets to be a central part of the foreign exchange market; they also have a reputation for banking unsavory characters like Jeffrey Epstein and Raul Salinas. Of late, however, their fortunes have significantly diverged.
- By the numbers: 10 years ago, Deutsche Bank had a market capitalization of $40 billion, while Citi was worth just $15 billion. Today, after the longest bull-market run in history, Deutsche Bank's market cap has shrunk by more than half to $16 billion, while Citi's has risen more than tenfold to $166 billion.
Losers: Some 18,000 workers in Deutsche's investment bank lost their jobs this week, with pretty much the entire equities sales and trading team being vaporized.
Flashback: In 1998, Deutsche Bank bought Bankers Trust for $10 billion, becoming the world's largest bank (by assets) in the process; as part of the deal, it also inherited a longstanding relationship with Donald J. Trump. "In 2015, Deutsche Bank wrote its BT assets down to zero as part of a $6.6 billion balance-sheet purge," wrote Crain's Aaron Elstein last year. "But the stink of this long-ago merger still lingers."
The bottom line: Citi is no one's favorite bank. But thanks to the 2009 bank bailout, it has managed to survive in today's world of low leverage and low margins. Deutsche, which received no bailout, can similarly no longer rely on leverage to provide profits. The problem is that without that leverage, it can't seem to find a route to sustainability.