If admitting that you have a problem is half of the solution, then Deutsche Bank is doing pretty well. The German bank has placed itself on a strict programme of spending abstinence under CEO Christian Sewing and - even if costs are likely to be slightly higher than expected in the third quarter (implying more energetic cuts in the fourth quarter), it's still on track to reach its €23bn cost target by the end of this year.
At Credit Suisse, meanwhile, there's also some restructuring going on. Costs in the markets business are being trimmed to CHF4.8bn (down from CHF6bn in 2014), and maybe even less. Credit Suisse's equities business is being "reformed" and restructured in the words of CEO Tidjane Thiam, and compliance costs are being squeezed. But what if this isn't enough?
Today's note from Deutsche Bank banking analyst Kinner Lakhani and his team suggests it might not be. Credit Suisse is the laggard in terms of investment banks - or at least it was at the end of last year.
As the charts below (from Lakhani et al) reflect, Credit Suisse had one of the worst cost to income ratios and one of the lowest returns on allocated equity among all European banks last year. The only European bank to perform worse than Credit Suisse was RBS (now known as Natwest Markets), which is somewhat of a special case.
Lakhani doesn't explicitly say so, but the implication is that Credit Suisse might want to take more drastic action.
French banks like BNP Paribas and SocGen or Barclays look a bit better bet by comparison. However, Deutsche's analysts also stress that European banks as a whole are becoming increasingly marginalized. As the three final charts below show, their market share has never been lower in fixed income trading, equities trading, and in capital markets. The America banks are eating everything.
Cost income ratio by bank, 2017
Return on equity by investment bank (allocated equity), 2017
Deutsche Bank FICC trading market share
Deutsche Bank equities trading market share
Deutsche Bank primary market share
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