Investment Banking: tough to make it pay

A quick glance at the stock price history of Deutsche Bank illustrates how difficult it is to make sustainable profits out of investment banking. Since the early 1990s the share price has only made moderate gains. So news that the bank may soon ask shareholders to support a Euro 9.8 billion capital raising leads one to ask how the management will create value to justify this capital increase. In retrospect it appears that even a leading position in investment banking does not guarantee the profits that management has repeatedly promised its shareholders. We also foresee problems in making the planned acquisition of Deutsche Postbank a very profitable investment as most of its 5 million customers belong to the less-affluent parts of society or keep their account at the bank only in order to facilitate simple payment transactions.