European Investment Banking: Europe and Investment Banking Are a Bad Match - by Leonid Bershidsky

Deutsche Bank is undercapitalized and may be facing "insurmountable headwinds," James Chappell, an analyst with the private bank Berenberg, wrote in a recent note. He's not just down on Europe's biggest investment bank, which he thinks should trade at 9 euros ($10.2) per share rather than the current 14.7 euros -- he's irritated with the entire sector, which is dying out in Europe and is still disproportionally powerful in the U.S.

Just a decade ago, Chapell's chief gripe with investment banking -- that it's not very profitable -- would have made no sense. Now, the Berenberg analyst describes it as "an industry in structural decline":

Each weak quarter is seemingly greeted with an excuse that it could have been better if not for the wrong type of volatility, client uncertainty or central bank intervention. Q1 2016 saw the absence of one-off profitable events that have protected revenues in the past. We have perhaps had the first glimpse of what core profitability in the investment banking industry really is (ROEs in the mid-single digits at best) and it could be even worse if the traditional seasonality occurs.

Deutsche Bank, which Berenberg says is more than 40 times levered, in need of fresh capital and at the same time unable to offer a decent return on it, has become a symbol of Europe's failed investment banking ambitions. Before the 2008 financial crisis, European banks sought a foothold on Wall Street, where Deutsche, Barclays and Credit Suisse cracked the "bulge bracket" banking elite to rank alongside the likes of Goldman Sachs, JP Morgan and Morgan Stanley. Now they're losing out to U.S. giants even on their home turf, according to Bruegel, a Brussels-based research institute:

Read more Europe and Investment Banking Are a Bad Match - Bloomberg View

What is the motivation behind these negative economic reports? re: "Global economic troubles spread from US and Europe to China, India and Brazil - by Paul Wiseman"

Mounting fears about Spain's financial health help illustrate why the global economy is in its worst shape since 2009.

Six of the 17 countries that use the euro currency are in recession. The U.S. economy is struggling again. And the economic superstars of the developing world — China, India and Brazil — are in no position to come to the rescue. They're slowing, too.

The lengthening shadow over the world's economy illustrates one of the consequences of globalization: There's nowhere to hide.

Investors drove up Spain's borrowing rates Monday over concern that the government's debts might force it to seek a bailout. The interest rate on Spain's 10-year bond touched 7.56 per cent — the highest since the euro began in 1999. Stocks around the world tumbled in response.

Worries about Spain intensified after its central bank said the economy shrank 0.4 per cent in the second quarter. The government predicts the economy will keep contracting next year as tax hikes and spending cuts hurt consumers and businesses.

Note EU-Digest: some of the above gloom and doom is also motivated and spread by conservative political circles, their allies in the financial sector and the press because they realize that if their liberal opponents political influence (Obama-USA) continues it could mean the eventual end of their uncontrolled and lucrative reign over global capital markets.   

Nowhere to hide: Global economic troubles spread from US and Europe to China, India and Brazil - Winnipeg Free Press

Switzerland rejects bid to ban investment banking

SP parliamentarian Susanne Leutenegger Oberholzer on Monday asked parliament to discuss a ban on investment banking as part of a debate on tough new capital laws aimed at preventing a repeat of the government bailout of UBS in the financial crisis.

"One of the large risks for the financial centre is investment banking," she told parliament, adding that the threat which a single staff member can pose to a large bank was clearly demonstrated by the UBS alleged rogue trade incident.

But parliament narrowly rejected her bid to reopen the debate with 55 votes against the motion, 42 in favour and six abstentions, meaning she will have to present her proposal to ban investment banking in a new legislative process.

For more: Switzerland rejects bid to ban investment banking | Reuters