After years of half measures and flawed attempts to compete “in nearly every corner of the banking market at the same time,” as its chief executive put it, Frankfurt, Germany-based Deutsche Bank yesterday unveiled an “extensive strategic transformation and restructuring” that will cut 18,000 jobs from its global workforce by 2022 and mark its retreat from Wall Street trading.
“Deutsche Bank will cut roughly a quarter of its total annual costs, from 22.8 billion euros ($25.6 billion) last year to 17 billion euros, through steps such as dropping the investment bank’s stock-trading business. It also plans to slim the division focused on fixed-income investments,” the AP’s David McHugh reports for Time.
“The aim is to focus on areas where the bank is among market leaders, and on businesses with steadier earnings such as serving corporate customers,” McHugh adds.
“The moves are a dramatic capitulation 20 years after Deutsche Bank acquired Bankers Trust in the U.S., enabling a rising profile in bond trading and other areas that helped it compete with Goldman Sachs Group Inc. and other big U.S. investment banks on the global stage,” writes Jenny Strasburg for The Wall Street Journal.
“‘What we have announced today is nothing less than a fundamental rebuilding of Deutsche Bank,’ Mr. Sewing wrote in a message to staff, adding that the changes ‘will bring us closer to our core strength, our DNA.’”
“The reorganization and cost-cutting plan is reminiscent of the bloodletting that followed the financial crisis in 2008. Yet it comes at a time of relative prosperity, the cumulative effect of years of scandal and management missteps. The bank that once symbolized German economic prowess is effectively abandoning any hope of playing in the same league as Goldman Sachs or JPMorgan Chase, and struggling simply to remain relevant,” observes Jack Ewing for The New York Times.
“The question in the months ahead will be whether the turnaround effort by Christian Sewing, Deutsche Bank’s 49-year-old chief executive, comes too late. Other European banks like UBS of Switzerland and Barclays in Britain pared back their ambitions after the 2008 financial crisis, but Deutsche Bank clung to investment banking even as it continued to generate billions of euros in losses,” Ewing adds.
“Sewing’s overhaul may not be particularly imaginative -- but it is what the lender needs if it is to do more than just survive. After five restructurings in four years, the depth of his cuts mark the latest plan out as a real attempt to change course. He deserves a fair hearing,” writes Elisa Martinuzzi in a Bloomberg Opinion column.
“For weeks, Deutsche Bank had telegraphed that a turnaround plan was coming soon. But analysts weren’t sure how far Sewing would go. The bank has slashed thousands of jobs since he took over in April 2018, but this will be the biggest round of layoffs under his leadership,” writes Julia Horowitz for CNN Business.
“Deutsche Bank did not provide a geographic breakdown of the cuts, but many are expected to hit U.S. employees. The bank employs almost 9,300 people in North America, with most of those jobs in the United States,” Horowitz continues.
“For years, Deutsche Bank has struggled with regulatory penalties and fines, weak profits, high costs and a falling share price. Sewing took over last year and promised faster restructuring after predecessor John Cryan was perceived to have moved too slowly,” Jefferson Graham writes for USA Today.
“Despite Deutsche’s retreat from equities, it will continue to offer a corporate finance service in equity capital markets, issuing new stock for clients. But there will be no sales and trading operation for investors who want to buy and sell equities. This business was never in the DNA of Deutsche, which had grown through the 1990s and 2000s as a fixed-income house,” Patrick Jenkins points out for CNA.
“Equities had been added in part so it could claim to be a ‘full-service’ bank and, more recently, to de-risk away from its core operation given the ever tougher post-crisis regulatory capital demands in fixed-income,” Jenkins adds.
The bank has also been in the headlines recently for questionable loans to a prominent American.
“Deutsche has come under renewed scrutiny in the U.S. over its business relationship with President Donald Trump. The House Intelligence and Financial Services Committees subpoenaed Deutsche in April for records on Trump’s finances. Trump and his family sought to have that subpoena squashed in court, but a federal judge ruled the bank can turn over financial documents to House Democrats,” reports Spencer Kimball for CNBC.