What's going on?

Last week, Deutsche Bank stated that it is still facing serious challenges in its investment banking division, and that it will aim to cut costs significantly. It is expected that Deutsche Bank will no longer aim to compete on the same global scale as their American competitors in traditional investment banking (as opposed to, for example, private wealth management). This is another example of how American investment banks are taking over from their European peers.

What does this mean?

Credit Suisse (CS), Deutsche Bank (DB) and Barclays have all replaced their CEOs this year and are undergoing strategic reviews � with deep cuts expected at both CS and DB (Barclays cut significantly a few years ago).   Despite this, European investment banks are not necessarily bad investments. The environment in general appears to be improving: regulatory fines are becoming less common and most banks have already gone through the painful process of issuing more stock (as a result of the financial crisis). Issuing new stock is usually bad for existing investors.

Why should I care?

1. In the past five years, the stock price of American investment banks has, on average, risen 45%, while those in Europe have declined, on average, 17%. But the slimmed-down European investment banks are now making good and relatively stable returns that could mean that their lagging performance will improve going forward.