Deutsche Bank AG plans to cut about 800 senior back-office staff as Chief Executive Officer Christian Sewing steps up cost reductions amid a slowdown in the trading business that has fueled much of the lender’s growth.
(Bloomberg) — Deutsche Bank AG plans to cut about 800 senior back-office staff as Chief Executive Officer Christian Sewing steps up cost reductions amid a slowdown in the trading business that has fueled much of the lender’s growth.
Deutsche Bank announced the steps alongside first-quarter earnings that showed revenue from fixed-income trading slumped 17%, one of the worst performances among the investment banks that have reported results so far. The decline was offset by a 35% jump in revenue at the corporate bank, allowing the lender to post its strongest top line since 2016.
Sewing is increasingly leaning on the corporate and private bank to drive growth as the trading boom of the past years peters out and Europe emerges from its experiment with negative interest rates. While he’s managed to lift revenue growth and profitability, high inflation and investment in controls have caused frequent expense overruns since he took over five years ago.
The job cuts announced Thursday should help the firm save an additional €500 million ($553 million) annually by 2025, bringing its medium-term target to €2.5 billion. The bank said it will record about €500 million in related charges this year, for expenses such as severance.
To support cost reductions, Deutsche Bank is shrinking its management board to nine members from the current ten, the lender said late Wednesday, confirming an earlier Bloomberg report. Americas head Christiana Riley is leaving in a broad reshuffle that also hands responsibility for the asset management arm to Chief Financial Officer James von Moltke.
Deutsche Bank shares swung between gains and losses, rising 2.3% at 10:44 a.m. in Frankfurt trading.
Sewing indicated that, despite the cost cuts, he plans to pick up more bankers and clients from Credit Suisse Group AG, after the Swiss lender had to be rescued by UBS Group AG. Selective hiring in the corporate bank, investment bank and wealth management should help Deutsche Bank beat a target for annual revenue growth of around 4% through 2025, he said.
“We’re a natural home for some of those client relationships and people, and that’s an opportunity we’ll look to capitalize on,” Chief Financial Officer James von Moltke said in a Bloomberg TV interview, referring to customers who may be seeking to diversify after the merger of the two Swiss banks.
Germany’s largest bank has already added dozens from Credit Suisse in recent months, including for credit trading. The trading business under Ram Nayak is trying to selectively expand into new products to offset the slowdown in its existing business.
The trading performance in the first quarter puts Deutsche Bank in line with Goldman Sachs Group Inc., which reported the worst fixed income result of the big Wall Street firms. Banks showed widely diverging performance in a volatile period marked by the collapse of Silicon Valley Bank and the run on Credit Suisse.
Deutsche Bank itself even became a target of speculators in late March, in a selloff that saw its stock drop as much as 15% on March 24. Von Moltke said the lender was the victim of a “speculative attack,” though clients broadly stuck by it.
The “market doesn’t understand how conservatively we’re capitalized,” von Moltke said. “Once March was over and we were into April, like a light switch, the concerns around the banking industry went away.”
The brief scare underscored how the Deutsche Bank remains vulnerable and why it has been slow to return capital to shareholders, having only just emerged from four painful years of cost cuts with a profitability that still trails many peers. While the firm promised to return as much as €8 billion to investors over the coming years, including through buybacks, it hasn’t yet announced a share repurchase program.
The German lender said on Thursday that it has started talks with supervisors about a buyback and expects to start one in the second half. A review of its risk models by the European Central Bank had delayed plans earlier.
(Updates with restructuring costs in fourth paragraph.)
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