'There is no time to lose:' Deutsche Bank is embarking on a major overhaul - and it will lead to big job losses
- Deutsche Bank set for major business overhaul including significant job losses.
- The German lender plans to scale back US operations in both rates sales and trading, while corporate finance operations in both the USA and Asia will shrink.
- Changes come as the bank reports a 79% drop in net profit in the first quarter.
- "Even a quick look at the figures makes one thing clear: we have to take action - fast," CEO Christian Sewing told staff.
LONDON - Deutsche Bank announced a major change of direction with large numbers of job losses expected as a result of the overhaul.
The plans, unveiled alongside the German lender's first quarter results, will see Deutsche pull back from its Wall Street ambitions, and focus instead on servicing its European client base.
Plans involve scaling back the bank's US operations in both rates sales and trading, while corporate finance operations in both the US and Asia will shrink.
"The bank will scale back activities in US Rates sales and trading, shrinking the balance sheet, leverage exposure and repo financing while remaining committed to its European business, which given its scale and relevance to our client base generates more attractive returns," Deutsche Bank said.
"Our Corporate & Investment Bank is also doing well in some areas and held or gained market share in certain areas," chief executive Christian Sewing said in a statement.
"However, we are not strong enough in other areas of this business. Therefore we have to act decisively and to adjust our strategy. There is no time to lose as the current returns for our shareholders are not acceptable."
"Even a quick look at the figures makes one thing clear: we have to take action - fast," he added in a letter sent to staff published by the bank.
The action is set to involve widespread job losses, although no indication was given as to how many jobs will be cut, with the bank saying only that it "intends to reduce front, middle and back office costs in the Corporate & Investment Bank and related infrastructure functions significantly." Deutsche Bank currently employs around 97,000 people globally.
"I know you have all worked tremendously hard in the past few years and we in the Management Board are grateful for this," Sewing told staff.
"But given our results and our share price, it is our imperative to take tough decisions and ensure we implement them in a disciplined way."
Sewing's announcement on Thursday comes alongside financial results which showed a 79% drop in net profit in the first quarter. Emphasising the decision to pull back from the US, the results showed trading revenue in the first quarter dropped 17% from last year. Over the same period, most rivals in the space saw revenues increase by double digit percentages.
The results announced on Thursday are the first presided over by Sewing, who has been at the bank's helm for less than a month, following the ousting of former boss John Cryan.
Cryan was brought in during 2015 to try and turn round the struggling bank, but lost the faith of Deutsche's board, and was swiftly ousted just over two weeks ago. He was replaced by Sewing, who is German and has been with the bank since 1989. It was widely expected that Sewing's appointment would lead to a strategic overhaul for Deutsche Bank.
Investors in the bank were not hugely moved by the announcements, and by 8.55 a.m. BST (3.55 a.m. ET; 9.55 a.m. CET) Deutsche Bank's Frankfurt-traded shares were down around 2%.