Deutsche Bank AG is planning a radical overhaul after the fund’s mishaps to focus on its investment banking business.
The new downsizing will see the bank cut 18,000 jobs, or one-fifth of its workforce, split its investment unit in two, and end its equities business following a $3.1 billion second-quarter loss.
The bank will also pause its dividend payouts this year and next as well as pay $8.3 billion in restructuring fees through 2022. This is the first time a dividend won’t be distributed since 1993.
The move will cut what Deutsche calls “risk-weighted assets” by about 40%, or $82 billion. The aftermath will see the creation of the “Corporate Bank,” which will manage areas of the balance sheet stemming from the abandoned or diminished businesses. It will be comprised of the Global Transaction Bank and the German commercial banking units.
This means several changes to the executive side. Board members Frank Strauss, head of retail, and Sylvie Matherat, chief regulatory officer, will leave at the end of the month. So will investment bank head Garth Ritchie. Stefan Hoops will head the new corporate bank. Christiana Riley , Bernd Leukert, and Stefan Simon will run its Americas, data and innovation, and regulatory and legal affairs divisions.
CEO Christian Ewing said in his Monday presentation that returns for Deutsche had been too low while costs were too high. This also comes off the collapse of the bank’s attempt to merge with Commerzbank in April. When the government-brokered deal evaporated, so did Ewing’s options to rally investors.
“I am very much aware that in rebuilding our bank, we are making deep cuts,” said Ewing in Sunday’s internal memo. “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.”
Deutsche Bank will also spend $19 billion on tech and control improvements. The firm has been hit with fines from US and European watchdogs for various compliance failures and risky transactions due to money laundering scandals and ties to President Donald Trump. The bank invested in some of his deals after competitors stayed away due to a string of bankruptcies.