70 Finance & economics The EconomistJuly 13th 2019
E
conomicsisallaboutallocating
scarceresources.Usuallythatisdone
bypricing.If demandforstrawberries
exceedssupply,priceswillrise.Custom-
ersmayswitchtoraspberries,orfarmers
mayplantmorestrawberries.Butsome
marketsaremorecomplex.
Takethoseforticketstopopular
events—likeWimbledon.Thetourna-
mentisplayedovera fortnighteachJuly
attheAllEnglandLawnTennis&Croquet
Club,whichhasa fixedcapacity.Raising
pricesuntildemandmetsupplywould
excludemosttennisfans,tarnishingthe
tournament’simage.A priceovershoot
wouldleavesomeseatsempty,ruining
theatmosphere.
Arounda sixthofseatsonCentreCourt,wherethebig-drawmatchesare
played,arereservedfordebenture-
holders,whopaythroughthenosefora
specificseatforfiveyears.Thesecanbe
freelyresold.Debenturesfor2021-25
wentfor£80,000($100,000);a single
resaleticketcoststhousands.
Otherseatsarerationedindifferent
ways.Thefirstischance:theAllEngland
Clubrunsa ballotsixmonthsbeforethe
tournamenteachyear.Winnersgetthe
optiontobuya randomlyallocatedpair
ofticketsata pricethatvariesaccording
tothedayandcourt—thisyear,between
£33and£190.Thesecannotberesold.
Thesecondisqueuing.Exceptonthe
finalfourdays, 500 ticketsforthetop
courtsaresoldeverydaytothosefirstin
line.Andeverydaythousandsmore
groundticketsareavailablefor£8-25;
theseallowaccesstoallothercourts.The
ticketsofthoseleavingearlyarealso
resoldforjust£10-15.
Withsomanyrationingmethods,
fansmustbetactical.Scoringa ticketto
CentreCourtgenerallymeansturningup
a dayinadvance;a groundticketmerely
requiresgettingupatthecrackofdawn.
Yourcorrespondentfavoursa more
relaxedapproach.Avoidthefirstfew
days,whenthetopseedsdispatchtheir
opponentsinshortorder—andthelast
few,whentherearefewermatches.In
betweenareplentyofcontests,manyof
themclose-foughtandthereforelong.
Maximiseyourtennis-watchingand
minimiseyourqueuingbyjoiningthe
resalelineintheearlyafternoon—there-
byenjoyingtheperfectmatch.Ball-gametheory
WimbledonticketsWatchingtennisatWimbledonrequirescash,luckorpatienceDominantstrategy“T
he most fundamental transforma-
tion of Deutsche Bank in decades.” So
Christian Sewing described his refashion-
ing of the chronically unprofitable firm,
announced on July 7th. Germany’s biggest
lender is trimming its investment bank—
and excising the trading of shares altogeth-
er. Mr Sewing, chief executive since April
2018, intends to cut costs by €5.8bn
($6.7bn) a year, a quarter of the total, by- Eighteen thousand jobs, a fifth of the
payroll, will go. Some equity traders were
shown the door on July 8th.
The restyling has taken five months to
plan (during which time Deutsche also
pondered and dismissed a merger with its
Frankfurt neighbour, Commerzbank). It
looks bold. Yet it is also a belated recogni-
tion of reality. For years after the financial
crisis, Deutsche clung to the hope that it
would again strut alongside Wall Street’s
most glamorous names, as it had for a
heady 20 years. Mr Sewing has binned the
last threads of that ambition. The remod-
elled Deutsche—150 years old next year—
will look a lot more like the sober servant of
international companies it originally was.
Mr Sewing is reshaping the bank
around four lines. At the centre will be a
corporate bank, chiefly providing Euro-
pean businesses with cash management,
trade finance, foreign exchange and so
forth: dull-sounding work but steady. A
substantial investment bank remains,
bringing in 30% of revenue, but geared to
the needs of corporate clients, by arranging
issues of securities and advising on merg-
ers. The third element is Germany’s biggest
retail bank, combining an eponymous
posh brand and the dowdier Postbank, and
the fourth is dws,its biggest asset manager,
of which Deutsche owns 80%. Mr Sewing is
stuffing €74bn of risk-weighted assets he
wants to discard into a “capital-release
unit” (he balks at the term “bad bank” but
may have to live with it).
Restructuring will cost Deutsche
€7.4bn, of which €5.1bn will land in 2019,
entailing a fourth net loss in five years. Mr
Sewing also plans to spend €13bn on sharp-
er technology and €4bn on improving in-
ternal controls. Deutsche has been in legal
hot water too often. According to the Wall
Street Journal, America’s Justice Depart-
ment is investigating whether Deutsche
broke laws in its work for 1mdb, a Malay-
sian state development fund. Yet he in-
tends to raise no new equity. By 2022 he ex-
pects Deutsche to be returning 8% on
tangible equity and starting to pay share-
holders a bounty of up to €5bn.
The restructuring is a start in itself. The
four core businesses notionally returned
1.7% last year and the bad bank, much of
which Deutsche hopes to run off briskly,
lost 6%. A more stable business model
should mean lower funding costs. Still, an
8% return might be the bare minimum that
shareholders expect. According to the
European Banking Authority, a supervisor,
four-fifths of European banks estimate
their cost of equity to be above that mark.
Even at a spruced-up Deutsche, costs will
soak up 70% of revenues. That beats today’s
90%-plus, but the best banks do far better.
The targets may also be hard to hit.
Granted, Deutsche has met Mr Sewing’s
cost-cutting goals so far; and he says hisprojection for revenue growth is “conser-
vative”, just 2% a year. But European bank-
ing is far from lucrative. Interest rates are
rock-bottom and growth is slow. Worse, in
Germany an army of public-sector and co-
operative banks tussle for the custom of
savers and companies. Michael Rohr of
Moody’s notes that Deutsche’s revenues
have dropped since its last strategic re-
vamp, in 2015. Quitting equity trading, he
adds, makes Deutsche’s investment bank
even more reliant on fixed income, where
fee pools have been shrinking.
Sensible as Mr Sewing’s plan looks, be-
cause Deutsche has fallen short so often in-
vestors will take some convincing. After it
was unveiled, the share price fell to new
lows, of just a fifth of net book value. “It is
different this time,” Mr Sewing told jour-
nalists on July 8th. It has to be. 7Or too late? The threadbare lender gets
a long-overdue makeoverDeutsche BankA stitch in time