The culling of 18,000 jobs at Deutsche Bank has started just hours after the lender unveiled its most radical strategic overhaul in two decades, with whole teams of equity traders in Tokyo and other Asian locations dismissed on Monday morning.
Drawing a line under a 20-year attempt to break into the top ranks of Wall Street, chief executive Christian Sewing on Sunday unveiled plans that will see Deutsche close down all of its lossmaking equities trading business and shrink its bond and rates trading operations significantly. The balance sheet allocated to trading will be slashed by 40 per cent.
Just eight hours after the regulatory filing was published in Germany, senior managers in Tokyo informed staff in a brief meeting that the equities trading operation all across Asia would be shut. The bank’s human resources team started group sessions with affected employees immediately afterwards.
Deutsche Bank did not disclose a regional breakdown of the job cuts. But as the investment bank’s trading operations will be hardest hit, the lender’s offices in London and New York will bear the brunt.
When asked about the atmosphere in the office on Monday morning, a Singapore-based employee whose team had not been hit by the cuts said: “The mood is always depressed in Deutsche. People know the bank is not doing well . . . It’s not like a party”.
“The announced measures are a crash diet,” said Alexandra Annecke, fund manager at Germany’s third largest asset manager Union Investment, adding that the steps were necessary and overdue.
Germany’s powerful service sector union Verdi, which has several representatives on Deutsche’s supervisory board, has welcomed the cuts to the investment bank, arguing it will stabilise the lender as well as German jobs, where 41,600 of its global 91,500 employees work.
Employment laws are rigid in Deutsche’s home country, and unions powerful. Deutsche has committed not to fire German retail employees against their will until mid-2021. Since late 2017, it has cut about 2,000 jobs a year using natural attrition and voluntary redundancies.
Verdi expects that the bulk of the additional job cuts announced on Sunday will happen outside Germany.
“For the time being, we cannot put a number to the consequences for infrastructure units based in Germany,” said Verdi boss and Deutsche supervisory board member Frank Bsirske. He added that the union expected that Deutsche would continue to refrain from forced redundancies in Germany.
The new strategy signals a retreat from Deutsche’s global ambitions and its aim to be Europe’s main rival to Goldman Sachs. One year ahead of Deutsche’s 150th anniversary, Mr Sewing is refocusing the lender on its historic foundations — financing German and European corporate clients and domestic retail banking.
Deutsche will create a new bad bank — dubbed a “capital release unit” — comprising €74bn of risk-weighted assets, equivalent to €288bn of leverage exposure on the balance sheet. The lender expects to finance the €7.4bn of restructuring costs without a capital increase.
It also hopes that asset disposals will allow it to return €5bn to shareholders either via special dividends or share buybacks from 2022. “This may yet prove optimistic,” Citi analysts wrote in a note to clients, adding that the likelihood of dividends or buybacks after 2022 was “very slim”.
Kian Abouhossein, JPMorgan analyst, said that Mr Sewing’s plan was “bold and credible”, adding that the key question now was: “Can they execute?