Deutsche Bank Takes Aim at Equities Segment, Cutting 7,000 Jobs

Will the fresh cuts under a new CEO finally score a rebound for Deutsche Bank?

The cuts at Deutsche Bank keep coming, as part of a new direction under the leadership of Christian Sewing. The most recent round will see nearly 25 percent of equities jobs put on the chopping block, with overall personnel reduced by upwards of 7,000 individuals, per a Bloomberg report.

The latest cuts follow the same trajectory of recently departed CEO John Cryan, whose ambitious cost-cutting measures never quite steadied Germany’s largest lender. Nearly three years of lean spending and winnowed segments ultimately failed in rekindling the bank’s profits, paving the way for his ouster last month, with investors hoping for a reboot.

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Today’s development could represent the start of such a process, following on the heels of last month’s lackluster earnings release. In Q1, Deutsche Bank’s Sales and Trading unit for Fixed Income and Currencies Business (FIC) suffered a major setback, with revenues dropping 16 percent at a time when other competitors were posting record revenues.

Fast forwarding to the present, Sewing is perhaps looking to make a large splash early in his tenure. The move is likely looking to score an early win for shareholders who at this point are in dire need of a positive quarter. Overall, the reduction in personnel will reduce its headcount to under 90,000, culminating in a restructuring charge of as much as €800 million ($935 million) in 2018, per a company statement.

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Additionally, Deutsche Bank also unveiled plans to reduce funds at risk and seek to further drive down expenses. Sewing has opted to bolster the bank’s presence in Germany and the EU, a stark contrast to its strategy over the past couple decades. He will try to avoid the same sort of pitfalls and ultimate failure of Cryan, whose ambitious measures never quite yielded the positive results investors so desired.

Target acquired – equities

Equities are now the area of focus for Sewing early on in his tenure. Though 7,000 jobs are now slated to be cut, it is a lesser figure than the rumored 10,000 mark that had been floated earlier this week. Sewing has recently hinted that Deutsche Bank would initially scale back US rates and trading as well as corporate finance in both the US and Asia.

This week’s cuts could thus be the start of a more pronounced consolidation of its non-European operations. Furthermore, Deutsche Bank will be reducing its leverage exposure in the corporate and investment space by more than €100 billion and target approximately a 10 percent post-tax return on tangible equity from 2021 onwards.

Investors will be waiting and see, as Deutsche Bank’s upcoming quarterly figures should serve as an early indication of the effectiveness of Sewing’s reboot.

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