Deutsche Bank to scale back investment bank as profits slump
- Author: Anthony Vega Apr 27, 2018,
Apr 27, 2018, 0:35
Deutsche Bank AG, Germany's biggest lender, yesterday reported a slump in profits in the first quarter, with new CEO Christian Sewing announcing deep cuts at its flagship corporate and investment banking division to tackle its woes.
Sewing, who joined the lender as a teenager and most recently led its retail banking division, made clear that he would accelerate changes to the bank's structure and strategy.
Moreover, it will likely reduce the size of its stocks trading business following a review.
"There is no time to waste", Mr. Sewing told analysts on a morning call, saying the dismal first-quarter results underscored the "need for immediate action". Deutsche Bank has a fifty-two week low of $13.52 and a fifty-two week high of $20.23.
The Frankfurt-based bank also said it would slim the top management body to nine executives from 12 and eliminate the practice of having co-heads of departments in an effort to speed decision-making. Mr. Cryan hasn't commented on the criticism.
The German bank will reduce its corporate finance businesses in the USA and Asia, pare US rates sales and trading, and review its global equities business with an eye toward downsizing it, according to the statement.
In a separate statement, the group said the unit would "focus its activities and resources on its European and multinational clients and the products which are most relevant for them, while reducing its exposure to other areas".
Previous chief executive John Cryan was sacked earlier this month. IPG Investment Advisors LLC bought a new position in Deutsche Bank in the fourth quarter worth about $991,000. That new operations chief, Frank Kuhnke, won't serve on the management board, unlike his predecessor; the role was downgraded to one level below the senior ranks. But it missed cost-cutting targets and suffered continued revenue declines, losing market share to stronger rivals and posting three consecutive full-year net losses. Investors and analysts have been demanding that executives clarify the bank's strategy, with some saying its USA investment bank should give up competing head-to-head with bigger, stronger US competitors. Progress was slow and though the bank restored its dividend a year ago, shareholders got only 11 cents per share.
Even compared to other European investment banks still battling through multiyear turnarounds, Deutsche Bank's challenges are vast, investors say. The lender had begun to retreat from some businesses under Cryan, who, in the year 2015, said that he would close operations in 10 countries, cut 10 percent of jobs, and decrease the number of investment bank clients by around half.
The bank has 10,000 employees in the U.S., with the majority of these being employed in corporate and investment banking.