Published: Mon, July 08, 2019
Markets | By Otis Pena

Economics - Deutsche Bank launches €7.4 bn overhaul

Economics - Deutsche Bank launches €7.4 bn overhaul

The Frankfurt-headquartered bank said Sunday it would drop its stock sales and trading unit as part of a plan to exit more volatile investment banking activities.

Finding steady revenue streams to produce the 7.4 billion euros ($8.31 billion) the bank expects in charges from cutting down its trading arm will be more challenging.

In addition, the bank plans to resize its Fixed Income operations in particular its Rates business and will accelerate the wind-down of its existing non-strategic portfolio.

In May, CEO Christian Sewing told shareholders he was ready to make "tough cuts" to improve the struggling bank's profitability and to raise a "disappointing" share price.

The reorganisation of the enterprise follows the failure of merger talks with rival Commerzbank in April.

The cuts were foreshadowed on Friday, when the head of Deutsche's investment bank Garth Ritchie agreed to step down.

It will also report a second quarter loss of €2.8bn to partly pay for the shake-up, which will significantly shrink its investment banking business. After consultation with the bank's regulators, the bank now intends to operate with a minimum CET1 ratio of 12.5% going forward.

"This could be a real new beginning for Deutsche Bank", said Szukalski, who also sits on the bank's supervisory board.

Deutsche Bank plans to cut 18,000 jobs in a sweeping, €7.4 billion overhaul created to turn around Germany's struggling flagship lender.

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The slashing of around one in five of its workforce, to 74,000 employees, is an unprecedented round of departures for Deutsche.

Up to 18,000 jobs will be axed at Deutsche Bank in a radical reorganisation of Germany's biggest bank.

Deutsche Bank has been struggling for years with the decline of its investment financial institution and has made several attempts to revamp its enterprise.

The bank did not disclose a geographic breakdown of the job cuts.

The board met on Sunday to agree the proposed changes, one of the biggest announcements of job cuts at a major investment bank since 2011 when HSBC said it would axe 30,000 jobs.

As one Barclays insider suggested the BBC: "Deutsche is where Barclays used to be 5 to 10 years in the past".

The bank was hit hard by a financial crisis a decade ago.

Since he took the helm in early 2018, Sewing has attempted to refocus the sprawling group on stable revenue-generating business areas, including retail banking and so-called transaction banking for businesses.

On top of the rank-and-file cuts, Deutsche is also rebuilding its board, sending away compliance chief Sylvie Matherat and two other executives.

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