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Finance: Deutsche Bank Cuts Jobs in Overhaul

FINANCE – Deutsche Bank’s shares perked up pre-market as the German bank got rid of whole Asian operations teams. This marks a sweeping start in one of the most significant overhauls at an investment bank.

Around 18,000 employees will receive the axe starting Monday, with the announcement of the cuts coming last Sunday.

The bank’s restructuring plan ultimately costs 7.4 billion euros, or $8.3 billion. Deutsche Bank is undoing years of work that made its investment services an essential power on Wall Street.

As part of the plan, the bank will scrap global equities business and cut some operations in its fixed-income division. Markets traditionally regard the latter as one of the bank’s strengths.

The bank’s stock appears to move 5.2% higher at the open, as per pre-market data.

A classic name in finance, Deutsche Bank didn’t provide a geographic breakdown for the job cuts. However, most of them will probably come from Europe and the US.

This Monday, on the other hand, started with cuts in Sydney, Hong Kong, and the Asia-Pacific.

One person with direct knowledge of the situation said the whole equity capital markets (ECM) is receiving the axe. Another source said the bank’s mergers and acquisitions department (M&A) wasn’t affected right away.

According to the bank’s CEO Christian Sewing, the company is tackling “what is necessary to unleash our true potential.”

Restructuring for Finance

Around 74 billion euros of risk-weighted assets will be part of the bank’s non-core unit. Its capital buffer will then shrink as part of the plan.

Deutsche Bank’s stock price has been down by half in the last couple of years. That means selling new shares wasn’t viable. The bank also said it didn’t plan a capital increase to finance the overhaul.

Sewing is going to utilize the bank’s capital cushion to fund the bank’s “biggest restructuring in decades.”

Therefore, the CEO has to make full use of the limited financial resources he can gather.

Further, the bank said its retail Chief Frank Strauss and Chief Regulatory Officer Sylvie Matherat would leave. Strauss and Matherat are both members of the company’s board.

Last Friday, they announced the departure of investment bank head Garth Ritchie.

New names are to take power. Stefan Hoops appears ready to oversee the new “corporate bank” unit. That unit will combine the transaction bank and the lender’s corporate-client unit.

Three management board members will also take charge. Christiana Riley is serving for the Americans, while Bernd Leukert will join on September 1 for data and innovation.

Stefan Simon will be the new chief administrative officer. Therefore, he will oversee regulatory affairs and legal.

The finance titan says the overhaul centers on the investment bank. The single unit, which brings in about half of the bank’s revenue to the table, will become two.

The transaction bank will disappear and will combine with commercial clients segment. The latter is currently in the retail unit, according to people with knowledge of the matter.

According to an analyst, the bank is trying to open a path to boost profitability. “Execution will be critical,” said the analyst.

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