How Deutsche Bank’s Woes Infect All European Lenders

Europe has too many banks making too little money. The continent’s big lenders appear to lurch from crisis to crisis, burning through chief executives and seemingly endless resets of strategy. The flailing is particularly dramatic when compared with American rivals. A decade ago, Europe’s top five banks earned more than their counterparts across the Atlantic Ocean. By last year – when the top five U.S. banks raked in more than $100 billion in profit – their European equivalents earned just a third as much. With the global financial system increasingly intertwined, weak banks in Europe are a concern for banking systems everywhere.

Consider Deutsche Bank AG. Germany’s biggest lender, which once projected the nation’s financial might onto the global stage, has descended into a whirlpool of woes. Unable to reverse a spiral of declining revenue, sticky expenses and rising funding costs, the bank has lost money in three of the last four years. Chief Executive Officer Christian Sewing has embarked on a radical overhaul -- the bank’s fifth since 2015 -- to reshape operations by exiting businesses and slashing its workforce by a fifth. In April, government-brokered merger talks with local rival Commerzbank AG collapsed.