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Wall Street is going to face some big questions over the next several months, and Deutsche Bank is laying them all out for banking executives to consider.
Deutsche Bank analysts this week published their quarterly "Question Bank" report, where they outline what they see as the biggest issues for Wall Street banks in the months ahead.
Big financial institutions are under pressure, from looming layoffs, to lower-for-longer interest rates. Deutsche Bank covers everything from how much interest banks earn on assets they own, to the rising use of automated systems to do what humans used to do.
Interest rates are next to nothing. So how much interest income are you making?
It's not a question for any one Wall Street bank, so much as it is an issue for all of them — especially the consumer banks. Net interest margin, or NIM, is how much interest is generated by banks' interest-earning assets. And in today's very low-interest rate environment, NIM has been under pressure for years. Deutsche Bank analysts had equally unappetizing questions for all of Wall Street, either of which has the potential to crimp revenue: "If short term rates rise, but long term rates decline, what happens to bank NIMs?" And, if they do not, "how much further NIM pressure is there?"
The Deutsche Bank analysts pointed out that net interest margins, which are expected to rise when interest rates rise, have been under pressure this year and will continue to experience pressure for the rest of the year. It's a question on other analysts' minds as well, and one banks may have to address on future earnings calls.
Bank of America: How much will it cut costs?
Cost-cutting is a critical issue at every Wall Street bank, but because consumer banks employ far more people to run branches, they are particularly cost-sensitive. And, with net interest margin still under pressure thanks to low rates, Bank of America is looking to strip out $3 billion in costs in 2018, taking expenses down to $53 billion. Deutsche Bank analysts ask: "Where are the savings coming from?"
There's a chance it will come via job cuts. Bank of America CEO Brian Moynihan said in May that efficiency is in the bank's "drinking water." But a representative for Bank of America told CNBC this week that the bank has plans to get expenses down by $3 billion over the next year and a half, and said Moynihan wasn't signaling anything to come when he spoke in May. For now, Bank of America staffers can breathe easy.
Goldman Sachs: When will it start lending online?
Investment banking giant Goldman Sachs has been taking itself through a vital transformation, building out online products and pushing further into the consumer businesses. Deutsche Bank analysts asked: "[Goldman Sachs] has already launched its online deposit taking platform. When will they launch the online lending platform, and what is the strategy?" It remains to be seen whether Goldman will run its own lending platform, or if the bank will branch out and form a partnership with an outside company, similar to the one JPMorgan Chase announced with On Deck Capital in 2015.
CNBC asked Goldman Sachs when it would launch its online lending platform. It's coming later this quarter, a representative for the bank said.
Et tu, Deutsche Bank?
Deutsche Bank didn't ask itself any questions. But there are certainly enough issues lingering that need to be addressed. Recently, German economist Martin Hellwig suggested the bank would be in a precarious position in the event of a financial crisis, and suggested Deutsche Bank may need to be nationalized.
Deutsche Bank, for its part, isn't buying Hellwig's dour assessment and says it doesn't need to be saved.
"There was an official stress test conducted by [European Banking Authority], which evaluated the capital position of European banks in an adverse scenario, " a Deutsche Bank representative told CNBC.com. "This test did not foresee any immediate capital need for Deutsche Bank."