Germany’s Deutsche Bank announced plans on Sunday to cut 18,000 jobs by 2022, in what is being called “a radical transformation of the bank.”
As part of the bank’s ongoing “commitment to improve long-term profitability and returns to shareholders,” the bank’s management board announced in a press release a series of measures to restructure operations.
The bank will implement a cost reduction program designed to reduce adjusted costs to EUR 17 billion ($19 billion) in 2022, and is targeting a cost-income ratio of 70% in that year. When completed, the job cuts should reduce the bank’s workforce to 74,000.
The restructuring involves the bank halting its equities-trading business and reducing headcount in its fixed income operations. The balance sheet allocated to trading will be cut by 40%. Many of the bank’s investment banking activities take place in New York and London, and so it is expected that those two locations will see major job losses.
Despite the cuts, the bank will still have more than $5 billion in revenues in the United States.
As part of the plan, Deutsche will also create a “bad bank” to manage the efficient wind-down of the assets related to business activities. These assets and businesses represented EUR 74 billion ($83 billion) of risk-weighted assets and EUR 288 billion ($323 billion) of leverage exposure, as of December 31, 2018.
Deutsche said the disposals would produce potential dividends or share buybacks starting in 2022.
In a letter to staff, CEO Christian Sewing said the transformation will bring Deutsche bank back to its core strength, serving German and European corporate and commercial clients worldwide.
On Monday, Sewing said he was feeling a mixture of relief and worry in regards to the restructuring plan, but was definitely ready to move onto the next phase.
“On the one hand, you are relieved because we have worked very, very hard over the last six months in order to get what we announced today,” Sewing explained. “I think the team pushed itself to the limits. We have done a fantastic effort to work” out these details, he said.
Sewing added that he was “already in phase two, and phase two is being excited about (the) execution … I think we have a very compelling strategy,” added Sewing. “People will now look at how fast, how decisive, (and) how disciplined we are in execution. So, it’s not only relief but excited that we can start now.”
Sewing said the bank is getting “more focused, but that doesn’t mean an end to global aspirations,” and it is not a farewell to Wall Street.
“We want to put resources there where we can win and where we have the franchise to win,” he said. “Saying goodbye to Wall Street is absolutely the wrong assessment.”
Deutsche Bank shares initially rose 2.5 % on Friday to 7.18 euros as markets anticipated the restructuring announcement.
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