Deutsche Bank is kicking off a brutal cull of 18,000 jobs as part of a $8.3 billion overhaul
- Deutsche Bank CEO Christian Sewing revealed a sweeping overhaul of Germany's biggest bank after a supervisory board meeting on Sunday.
- The restructuring plan will see the bank shift from servicing asset managers and hedge funds to selling cash management, trade finance, and hedging products to corporate clients.
- The transformation is set to include the cutting of 18,000 jobs, and cost $8.3 billion.
- We've outlined what we know about what's going on at Deutsche Bank below.
- Watch Deutsche Bank trade live.
Shares in Deutsche Bank climbed 4% on Monday morning after CEO Christian Sewing revealed a sweeping overhaul of Germany's biggest bank after a supervisory board meeting on Sunday.
The restructuring plan will see the bank shift from servicing asset managers and hedge funds to selling cash management, trade finance, and hedging products to corporate clients. It's expected to eliminate 18,000 jobs, reducing total headcount by about a fifth.
"For some time now we've noted various efforts at shaking up Deutsche Bank have been too little, too late," said Neil Wilson, chief market analyst for Markets.com "Now it's the right medicine, it just should have been taken a few years ago."
"While restructuring can deliver important cost reductions, it is less clear what Deutsche's plans are to grow revenues thereafter," he added.
In a note to staff, seen by CNBC, Sewing said: "I am very much aware that in rebuilding our bank, we are making deep cuts. I personally greatly regret the impact this will have on some of you. In the long-term interests of our bank, however, we have no choice other than to approach this transformation decisively."
"What we have announced today is nothing less than a fundamental rebuilding of Deutsche Bank through which we are ushering in a new era for our bank," Sewing said in a statement on Sunday. "It is about once again putting the needs of our clients at the centre of what we do — and finally delivering returns for our shareholders again."
Here's what we know about Deutsche Bank's restructuring:
- Sewing's $8.3 billion restructuring plan is the largest in the bank's history.
- Deutsche Bank expects to spend 5.1 billion euros on restructuring this year.
- Sewing plans to spend 7.4 billion euros on shrinking its investment bank, global presence, and fixed-income business.
- The bank is betting the transformation will lower its adjusted costs by a quarter or 6 billion euros by 2022.
- The lender intends to cut risk-weighted assets by 40% in targeted businesses, and invest 4 billion euros in strengthening controls.
- Deutsche Bank will create a fourth division led by transaction banking chief Stefan Hoops, combining its transaction bank with its commercial banking unit.
- Sewing is scrapping the dividend this year and next, but transferring 74 billion euros of risk-weighted assets to a non-core unit to finance future returns to shareholders.
- Retail chief Frank Strauss and regulatory head Sylvie Matherat will leave the company this month, following the departure of investment banking chief Garth Ritchie last week.
- Christiana Riley, former finance chief for the corporate and investment bank, is taking charge of the Americas.
- SAP's digital business services executive Bernd Leukert is joining as head of data and innovation.
- Stefan Simon, a member of the bank's supervisory board, will become chief administrative officer and handle legal and regulatory affairs.
Here's why the restructuring is happening:
- Since acquiring Bankers Trust in 1999, Deutsche Bank has tried to compete with Goldman Sachs, JPMorgan, and other Wall Street investment banks with little success.
- Deutsche Bank's stock had plunged by more than 25% prior to the restructuring plan's unveiling.
- Employees are reportedly skipping work, openly searching for new jobs, and going out for drinks in the early afternoon.
- The bank has struggled financially due to rock-bottom interest rates in Europe and fierce competition in the German banking industry, limiting its ability to invest and expand in line with US rivals.
- Deutsche Bank has failed three of the Federal Reserve's stress tests in five years, and although it passed the central bank's latest one, it continues to face restrictions from US regulators due to its compliance failures.
- The bank's proposed merger with domestic rival Commerzbank fell through in April, leading Sewing to promise "tough cutbacks" to turn the lender around.
- US authorities are reportedly investigating whether the bank complied with anti-money-laundering regulations, including its handling of suspicious transactions between Jared Kushner, a White House senior advisor and Donald Trump's son-in-law, and Russians prior to the US presidential election in 2016.
- Deutsche Bank employees reportedly recommended executives flag the suspicious transactions with the Treasury Department's financial crimes unit, but top executives refused.
- German authorities raided Deutsche Bank in connection with suspected tax evasion in April.
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