Deutsche Bank CEO slashes 18,000 jobs

Bloomberg

Deutsche Bank AG unveiled a radical overhaul that will see the lender exit its equities business, post a $3.1 billion second-quarter loss and cut the workforce by a fifth to reverse a slide in profitability.
Chief Executive Officer Christian Sewing will shelve the dividend this year and then take restructuring charges of 7.4 billion euros through 2022 to pay for an overhaul that shrinks the German lender’s once-mighty investment bank along with its global footprint and key fixed-income business.
Deutsche Bank shares were down 0.7 percent in Frankfurt trading as of 12:35 pm after climbing as much as 4.4 percent earlier. The lender’s riskiest bonds also reversed earlier gains, with perpetual notes down about 0.5 euro cents to around 90 cents on the dollar and notes callable in 2022 down 0.4 cents. Analysts said that while the restructuring was broader than expected, the newly announced targets will be tough to achieve.
“Today we have announced the most fundamental transformation of Deutsche Bank in decades,” Sewing said. “We are tackling what is necessary to unleash our true potential.”
The scale of the revamp underscores the failure of Sewing and his recent predecessors to solve the fundamental problem: costs were too high and revenue too low. After government-brokered merger talks with Commerzbank AG collapsed, the CEO had few alternatives to bolster market confidence. His plan was approved by the board.
Some of the financial targets set out in the plan look overly optimistic and the goal of achieving a return on tangible equity of 8 percent by 2022 looks “highly improbable,” Citigroup analysts including Andrew Coombs, Nicholas Herman wrote in a note to investors.
About 74 billion euros of risk-weighted assets will become part of a new non-core unit and the lender’s capital buffer will be reduced as part of the plan. With the stock price down by half in the past two years, selling new shares wasn’t an option and the bank said it does not plan a capital increase to pay for the overhaul.
Instead, Sewing is tapping into the bank’s capital cushion to fund what he’s billed as the bank’s biggest restructuring in decades — which means he needs to be strategic with the scarce financial resources he can generate.
The bank said retail chief Frank Strauss and Chief Regulatory Officer Sylvie Matherat, both board members, will leave this month. Other executives will be on the rise. Stefan Hoops was named to oversee the new “corporate bank” unit that will combine the transaction bank and the lender’s corporate-clients unit.
The investment bank is the focus of the overhaul. The unit, which accounts for roughly half of Deutsche Bank’s revenue and which was the cause of its decline, will be broken in two.
Deutsche Bank is accelerating its shift away from institutional trading clients, like hedge funds and asset managers, and will instead focus on servicing big companies, offering them cash management, trade finance and hedging.
The change is designed to accelerate the shift away from acting as the first port of call for institutional clients such as asset managers and hedge funds towards selling cash management, trade finance and hedging products to corporate clients.

Deutsche staff in London learn fate as cuts begin
Bloomberg

Deutsche Bank AG started cutting hundreds of jobs at its investment bank in London on Monday as the German lender embarks on its
most aggressive restructuring plan yet.
Staff were seen leaving the building in the City of London with thick white envelopes detailing their layoff packages. Earlier, they queued up inside the office to learn their fate from human resources, according to Deutsche Bank employees who spoke to Bloomberg News.
Some former traders looked visibly shaken and were crying as they left.
Inside the office, CEO Christian Sewing was in attendance as the cuts got underway.
London houses around 7,000 of Deutsche Bank’s UK employees and is the hub for the lender’s investment bank, which is bearing the brunt of the cuts. Equities teams from Sydney to Mumbai were among those losing their jobs as part of Sewing’s plan to reverse a slide in profitability.