After experiencing a sevenfold rebound in stock prices, Deutsche Bank (DB.US) is about to announce a three-year plan focusing on "stronger profitability + cost control."

When Christian Sewing, a seasoned veteran who has been a prominent figure in the European financial industry for over a decade, began planning the next major phase of his tenure as Chief Executive Officer of Deutsche Bank Aktiengesellschaft (Deutsche Bank AG), investors were preparing to embrace almost the same approach: continuing significant cost savings in the retail banking division and targeted long-term investment in the investment banking business, together laying the foundation for Deutsche Bank Aktiengesellschaft's stronger profitability. The CEO of Germany's largest commercial bank is set to unveil the core strategic plan for the next three years next Monday. Wall Street analysts and shareholders of Deutsche Bank AG widely expect the CEO to announce new financial expansion targets such as stronger profit goals, but anticipate little overall strategic change. "Christian Sewing has already got the ship back on track and will set forth more ambitious return and cost targets," said Alexandra Annecke, a senior fund manager at Union Investment, one of Deutsche Bank Aktiengesellschaft's major institutional shareholders. "But we do not expect significant changes in strategy." Since taking over as CEO of Deutsche Bank in 2018, Sewing has led the long-standing German Financial Institutions, Inc. to record profits after years of continuous losses, legal setbacks, and confidence crises. After a painful restructuring early in his tenure - which saw the CEO face criticism from some shareholders - Sewing's leadership benefited from higher interest rates and "well-timed" market volatility that supported Deutsche Bank's trading business, driving a new bull market in global stocks. In terms of stock price, Deutsche Bank Aktiengesellschaft's share price has soared nearly seven-fold since hitting a low point in the European stock market five years ago, benefiting from consistently strong overall performance, the rebound in loan business from the previous high-interest-rate cycle in the Eurozone, and the strong recovery in trading business driven by the restructuring and global bull market in stocks. Deutsche Bank Aktiengesellschaft's American Depositary Receipt (ADR) shares (DB.US) have followed the strong rally in European stocks, surging as much as 130% this year, significantly outperforming the S&P 500 index and benchmark indices of mainstream bank stocks in the U.S. Sustaining a similar strong business growth rate since 2018 may face challenges, mainly due to the fading tailwinds from the previous high-interest-rate cycle and the uncertain overall economic conditions in Europe. Despite experiencing a new long-term bull market and strong overall performance, Deutsche Bank Aktiengesellschaft remains one of the weakest large loan institutions in Europe in terms of profitability, and one of the few European commercial banks still trading below or near book value, which may limit Sewing's ability to take bolder actions in the wave of mergers sweeping across Europe. This strategic update activity at Deutsche Bank Aktiengesellschaft will be the last involvement of outgoing Chief Financial Officer James von Moltke, a key figure in helping Sewing restore confidence in Deutsche Bank. Earlier this year, after Deutsche Bank Aktiengesellschaft extended Sewing's contract for another three years until April 2029, von Moltke decided to resign. This move also closed the window for the respected CFO to further develop within Deutsche Bank Aktiengesellschaft. Stronger ROTE targets The chart below shows the tangible common equity return (ROTE) targets of major European commercial banks for 2026, which are significantly improved compared to previous years. Several large institutional investors expect Deutsche Bank Aktiengesellschaft's management to raise its tangible common equity return (ROTE) target to 12% or even higher. According to its long-term incentive plan, the bank's compensation system has fully linked board member bonuses to achieving this goal by 2025-2027. According to insiders, the investment banking business will continue to be a key pillar and major growth driver of Deutsche Bank Aktiengesellschaft's strategic plan. Insiders also said the bank benefited from a strong fixed-income and currency (FIC) trading business this year and plans to continue long-term investment in individual investor products and advisory teams. Deutsche Bank's future key areas of focus will include credit trading activities and precious metals trading activities related to Deutsche Bank Aktiengesellschaft. However, one insider suggested that in order for these opportunities to be considered worthwhile to spend more time on, they would need to bring in revenues of at least 70-80 million. Deutsche Bank Aktiengesellschaft is also expected to continue rebuilding its merger advisory business, as well as its equity and debt issuance businesses. As a key signal of the bank's focus on this business, Sewing attended the bell-ringing ceremony of the German healthcare company Ottobock SE & Co. in October. Insiders add that bold moves such as a return to proprietary stock trading (Deutsche Bank Aktiengesellschaft officially exited in 2019) are not on the bank's strategic agenda. Similarly, Deutsche Bank Aktiengesellschaft is expected to avoid a "day-and-night" type of merger, with the lingering legal issues and integration nightmares surrounding Postbank's retail business for a decade still fresh in memory. Deutsche Bank Aktiengesellschaft's retail banking business remains one of the biggest challenges, often with high operating costs but relatively low profitability. The bank is expected to focus more on ensuring that its allocated capital truly generates strong returns, meaning parting ways with customers who generate little profit while continuing to push into higher-profit margin large wealth management businesses. "The retail banking business has been dragging down the profitability of the entire Deutsche Bank Aktiengesellschaft group, but there has been some improvement recently," said Annecke, a fund manager at Union Investment. "We hope these strategic plans will provide more details on how the bank will drive trends in retail business development." The credit rating of Deutsche Bank Aktiengesellschaft continues to improve, benefiting from the bank's performance rebound under Sewing's strategic leadership. In terms of corporate banking, Deutsche Bank Aktiengesellschaft will continue its core strategy as a key financier for German export-oriented companies. After some of its transaction banking businesses were handed over to European bank competitors following a credit rating downgrade of the bank, Deutsche Bank Aktiengesellschaft has regained ground in stable business lines such as cash management and trade finance, driving a strong rebound in its corporate banking business. Global investors will also meet the new CFO of Deutsche Bank Aktiengesellschaft, Raja Akram, at the large strategic event on Monday. Akram, a former Deputy CFO at Morgan Stanley, joined Deutsche Bank Aktiengesellschaft in October and is expected to officially take office next year.