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July 8, 2019

Deutsche Bank to layoff thousands as part of major business restructuring

Deutsche Bank has announced a series of measures including culling thousands as a part of its restructuring efforts to support growth and improve profits.

The announcement follows reports that the bank is mulling overhauling its businesses to revive its market value and share prices.

According to media sources, the complete overall will result in 18,000 redundancies and will cost the company around €7.4bn.

The restructuring plan includes exiting equities sales & trading business as well as scaling down its investment bank.

The lender will also trim the amount of capital used by the fixed-income sales & trading business.

Deutsche Bank announced that it will create a fourth business division with the global transaction bank and German commercial banking business. This division is dubbed as Corporate Bank.

Additionally, it will create a new Capital Release Unit (CRU) to facilitate the wind-down of the business activity assets. The assets include around €74bn of risk weighted assets and €288bn of its leverage exposure.

The overall restructuring will be funded through existing resources, maintaining a minimum Common Equity Tier 1 ratio of 12.5%.

The measures are part of Deutsche Bank’s strategy to focus on its core businesses of corporate banking, financing, private banking, asset management, origination & advisory and foreign exchange operations.

Deutsche Bank will also invest €13bn in technology by 2022 to enhance operations, products and services.

Deutsche Bank CEO Christian Sewing said: “Today we have announced the most fundamental transformation of Deutsche Bank in decades.

“We are tackling what is necessary to unleash our true potential: our business model, costs, capital and the management team. We are building on our strengths.

“This is a restart for Deutsche Bank – for the long-term benefit of our clients, employees, investors and society.”

As a part of the programme, the German bank announced a new leadership team with key members leaving the organisation.

Deutsche Bank restructuring:

Deutsche Bank has struggled for profitability since the financial crisis, with its share price declining by over 70% in the last five years.

A bank-wide overhaul has been ongoing since Christian Sewing became CEO in April 2018, with a reduction in headcount of around 7000 announced shortly after.

It was reported in March that Deutsche Bank was in discussions with Commerzbank over a potential merger, which would create a single bank with over $2 trillion in assets.

Concerns were quickly raised given the beleaguered financial position of both parties, and the talks collapsed in late April, after the parties were unable to reach a deal that provided “sufficient added value”.

Amidst rumours of talks with other suitors over a merger apparently ongoing, Deutsche showed some positive intent entering the UK mortgage market at the end of May.

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