Take your medicine early
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Take your medicine early

When Lehman Brothers collapsed in 2008, the responses either side of the Atlantic were markedly different.

The US, as is its way, threw money at the problem.

Its Troubled Asset Relief Program was a sledgehammer, but it was an effective one that allowed banks to recapitalise quickly and start figuring out how they were going to make money on the earth they had been brought down to.

Europe, as is its way, had several summits.

To be fair, with a plethora of central banks and national regulators, a good summit is the only way to get things done sometimes.

But nearly a decade on from Lehman, some of the continent’s banks are in danger of looking equally slow footed.

Barclays saw its shares literally decimated on Tuesday after it announced its latest restructuring. Deutsche Bank’s management were probably happy to have someone else take flak for a while.

Both banks have new chief executives, who were brought in because their predecessors could not convince investors their turnaround plans would work.

Deutsche does have a disadvantage. Post-crisis regulation was pretty much aimed at making its business model extremely expensive, if not completely impractical.

What’s more, old style investment banking — think enthusiastic prop trading  — was Deutsche’s profit engine, and its IB remains its core business. It doesn’t have a solid cash cow to rely on, like UBS does with wealth management or Barclays does with retail.

But with their restructuring phase all but complete, firms like Goldman Sachs and JP Morgan are free to hunt the next golden ticket, rather than constantly referring to “legacy costs” in their investor presentations.

JP Morgan recently claimed it was now a technology company. Dubious, sure, but deals are being struck with fintech firms and the message is clear. They can see Silicon Valley coming to eat their lunch, and they are trying to do something about it.

The overriding theme of post-crisis banking is that those that acted earliest, most drastically, or both, are now looking forward, instead of back.

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