64 Finance & economics The Economist January 29th 2022
would shrink its investment bank, and
shut down the trading of shares altogether.
And he announced that he would cut costs
by €5.8bn a year, a quarter of the total, to
€17bn in 2022. Eighteen thousand jobs, a
fifth of the payroll, would go.
Mr Sewing’s restructured bank consists
of four pillars. The two biggest in terms of
revenue are its retail arm and its invest
ment bank. After its merger in 2018 with
Postbank, a German postal bank, Deutsche
remains the country’s biggest retail lender.
The investment bank, which is still sub
stantial, brought in more than a third of
revenue last year, a chunk of it from trad
ing fixedincome securities, currencies
and commodities.
The two other pillars are a corporate
bank that provides mainly European busi
nesses with services such as cash manage
ment and trade finance, and dws, Ger
many’s biggest asset manager, which is
mostly owned by Deutsche and is, accord
ing to analysts, its most consistently prof
itable business.
“Mr Sewing has done a good job in a
tough environment,” says Stuart Graham,
an analyst at Autonomous Research who
argued in a report in 2018 that Deutsche
Bank’s business model was broken beyond
repair. The period when Deutsche was fre
quently in trouble with the law seems to
have passed. Creditrating agencies such
as Fitch and s&pupped many of Deutsche’s
ratings last year, arguing that its strength
ened business model, sound asset quality,
decent funding and liquidity positions, as
well as its adequate capitalisation, in
spired confidence.
Still, no one thinks Deutsche is out of
the woods yet. Last year’s boom in fixedin
come trading was unexpected and may not
last, says Jon Peace of Credit Suisse, a bank.
Deutsche needs to start bolstering capital
to prepare for Basel 4, a new set of regula
tions that will take effect in 2025. More
over, its costs are still high compared with
its peers. Mr Sewing must cut them further
if he is to meet his ambitious targets.
The big question is whether Mr Sewing
will reach his goal of a return on tangible
equity of 8% and start to pay shareholders a
bounty of up to €5bn in dividends this year.
The bank made no payments for 2019 and
2020, and only a small one for last year.
As a result, Deutsche has not persuaded
shareholders that it generates enough pro
fits to provide an adequate return. The
bank is therefore still trading at less than
half of its book value. And analysts are
doubtful that Mr Sewing’s target can be
reached. Jochen Schmitt at Metzler, a Ger
man bank, predicts a 4.8% return on equity
this year; the consensus forecast among
analysts is 5.5%. Deutsche may have come
a long way since hitting rockbottom.Ne
vertheless, Mr Sewing may not beableto
look back with satisfaction just yet.nV
ideos tagged#moneytokhavehad
10.6bn views on TikTok—more than
#tacotuesday, #gossip and #cookingtik
tok. Creators can use the tag to signal
that their posts are part of a genre on the
shortvideo platform that offers financial
advice. In posts lasting less than a mi
nute, Mandi WoodruffSantos posts
career and investment tips to her 27,500
followers. Ms WoodruffSantos, who was
born in Atlanta, Georgia, says that her
workingclass parents did not discuss
investments at the dinner table, and her
education left her with little knowledge
of how to manage a credit card or to
negotiate a raise. Now she and other
influencers help their followers with
their money woes.
It has not quite gained the notoriety
that Reddit, an online forum frequented
by many retail punters, earned during
the spectacular rise of GameStop stock
last year. But TikTok, which has 1bn users
worldwide, is introducing many young
Americans to the world of savings and
investment. Nearly a quarter of investors
aged 18 to 40, and 41% of those between
18 and 24 years old, have sought financial
advice on the platform, according to a
survey conducted last year by Magnify
Money, a website.
Videos can rely mainly on text (“HOW
TO BEAT CREDIT CARDS” or “Adulting
101”), or might feature cute kids or danc
ing. Some creators use their experience
to explain financial concepts. Mark
Tilbury, the boss of a retail firm, has
amassed 7m followers with his explanationsofthestrategies of Fortune 500
companies. Other creators draw on per
sonal experience. Tori Dunlap—who
founded Her First 100k, which offers
money tips and paid financial courses to
women—says she grew up in a family
that talked often about finances. “I be
came the goto friend for money ques
tions,” says Ms Dunlap, now a money
wise pal for some 2m followers. Still
others tout the earnings potential of
stocks, such as videos of daytraders in
California posing with their sports cars
after striking gold in the markets.
As with social media more broadly,
the problem is that posts can be mis
leading or inaccurate. TikTok has some
rules to monitor content: users can flag
posts and creators must label branded
content from which they stand to profit.
Those clicking on #moneytok are warned
that investing comes with risks. But
some videos are as short as 15 seconds,
leaving little time for nuanced discus
sions of those risks. Only about 10% of
top influencers mention financial qual
ifications in their TikTok biographies or
on their personal websites, according to
a study by Paxful, a cryptocurrency
trading platform. Daytraders posting on
TikTok flaunt large gains, but few might
admit to nursing losses, as they may be
doing after the market turmoil of recent
days. The popularity of #moneytok cer
tainly speaks to users’ enthusiasm for
finance and investing. The hope is that
social media nurtures, rather than de
stroys, that interest. FinancialinfluencersMoneyToks
N EW YORK
Personal finance is a viral hitWhat makes the market tik?