Deutsche Bank is Cutting Thousands of Jobs

In a major $7.4 billion euros overhaul, Deutsche Bank is slashing 18,000 jobs around the world.

The bank will be cutting back its global equities business as well as cutting back its investment bank. It will also cut some of its fixed income operations.

According to a Reuters, Deutsche Bank will be setting up a new so-called “bad bank” to wind-down unwanted assets, with a value of 74 billion euros of risk-weighted assets.

Last Friday the CEO of Deutsche’s investment bank Garth Ritchie agreed to step down. This may have been a foretelling sign of what was to come.

According to Chief Executive Officer Christian Sewing who only took the reigns last year, “This is a restart.” He wrote to company staff, “We are creating a bank that will be more profitable, leaner, more innovative and more resilient.”

Part of the e-mail to staff reads:

Dear Colleagues,

At the Annual General Meeting in May I said that we would speed-up the transformation of our bank significantly, that we would have to take faster and more radical action. Since then, many of you have asked me when we would announce concrete next steps.

Today is that day: After further stabilizing our bank last year, we are now entering the next phase – and that means nothing less than a fundamental transformation of our bank.
First let me say this: I am very much aware that in rebuilding our bank, we are making deep cuts. I personally greatly regret the impact this will have on some of you. In the long-term interests of our bank, however, we have no choice other than to approach this transformation decisively. Only then can we build on our long-standing history and make Deutsche Bank a leading bank once again. A bank which we can be justifiably proud of.
I will not go over all the details that we just published in our media release.

I will stress though that what we have announced today is nothing less than a fundamental rebuilding of Deutsche Bank through which we are ushering in a new era for our bank. This is a rebuilding which, in a way, also takes us back to our roots. We are creating a bank that will be more profitable, leaner, more innovative and more resilient. It is about once again putting the needs of our clients at the centre of what we do – and finally delivering returns for our shareholders again.

The transformation will bring us closer to our core strength, our DNA. Almost 150 years ago, we were founded as a bank that serves German and European companies worldwide, that provides a global network and that paves the road to Europe for international companies and investors. This is exactly the role that the Corporate Bank which we are forming will play. Going forward, our Corporate Bank will also serve the corporate and commercial clients of Deutsche Bank and Postbank in our home market. This division is focused on midcap clients, family-owned companies and multinational corporates. It will hold deposits of more than 200 billion euros and process financial transactions with a value of one billion euros every day.

Alongside our Corporate Bank will be an Investment Bank that connects our corporate clients with capital markets worldwide. In this division, we will concentrate on those areas in which we have a longstanding expertise – credit, fixed income and currencies, as well as strategic advice. Going forward, our Investment Bank will be smaller – but all the more stable and competitive.

The strict separation between private and corporate clients also means we will have a much more focused private client business. In our home market, we are already a market leader in many businesses. It is our stated goal also to achieve that position in areas where we are not yet leading but have strong growth potential by offering innovative digital solutions and outstanding advice. The task is to find ways to combine these two propositions, because it is exactly in this combination that our strength lies. In order to achieve this, we need to manage our cost base more efficiently. That is why we will accelerate the integration of Deutsche Bank and Postbank.

Our goal is clear: We want to achieve a post-tax Return on Tangible Equity (RoTE) of 8 percent by 2022. It is absolutely vital that we achieve this if we want to be competitive in the long term.
Deutsche Bank will be reporting second quarter results on July 24th.

Disclaimer: We have no position in Deutsche Bank AG (NYSE: DB) and have not been compensated for this article.