The culling of 18,000 jobs at Deutsche Bank has started only hours after the lender unveiled its most radical strategic overhaul in two decades, with whole teams of equity traders in Europe, the US and Asia being dismissed on Monday morning.
Drawing a line under a 20-year attempt to break into the top ranks of Wall Street, chief executive Christian Sewing on Sunday unveiled plans to shut Deutsche’s lossmaking equities trading business and shrink its bond and rates trading operations significantly. Shares in Deutsche were down 4.5 per cent at €6.85 on Monday.
Mr Sewing told journalists on a call on Monday morning that the job cuts “have been the most difficult and painful part of our decision making” as “people and their fates are very important to us”, adding that the bank needs to be honest with itself and “say where we are strong and where we are not”.
One Deutsche employee in London said: “This is really sad what is going on right now in the bank, but I guess from top management’s point of view that is what is needed to be done.”
Staff losing their jobs in London were given “notification risk” notices, offered a consultation session with human resources and then given the day off, according to one person familiar with the matter.
One banker, who said he was a manager in Deutsche’s equities department in London, said he had been called into a meeting room, dismissed and told to clear his desk and leave. “It’s quite strange because the stuff I was working on still impacts the portfolio so I don’t know what they’re going to do with it,” he added as he departed Deutsche’s UK headquarters carrying a box with personal effects.
Eight hours after the regulatory filing was published in Germany, senior managers in Tokyo started informing staff in a brief meeting that the equities trading operation across Asia would be shut. The bank’s human resources team started group sessions with affected employees immediately afterwards.
Deutsche Bank did not disclose a regional breakdown of the job cuts. But as the investment bank’s trading operations will be hardest hit, the lender’s offices in London and New York will bear the brunt.
When asked about the atmosphere in the office on Monday morning, a Singapore-based employee whose team had not been hit by the cuts said: “The mood is always depressed in Deutsche. People know the bank is not doing well . . . It’s not like a party.”
The cuts to Deutsche’s investment bank are one of the most drastic round of job losses since 26,000 employees found themselves out of work when Lehman failed in September 2008.
Germany’s powerful service sector union Verdi, which has several representatives on Deutsche’s supervisory board, has welcomed the cuts to the investment bank, arguing it will stabilise the lender and German jobs, where 41,600 of its 91,500 global employees work.
Employment laws are rigid in Deutsche’s home market, and unions are powerful. Deutsche has committed not to fire German retail employees against their will until mid-2021. Since late 2017, it has cut about 2,000 jobs a year using natural attrition and voluntary redundancies.
“For the time being, we cannot put a number to the consequences for infrastructure units based in Germany,” said Verdi boss and Deutsche supervisory board member Frank Bsirske. He added that the union expected that Deutsche would continue to refrain from forced redundancies in Germany.
The new strategy signals a retreat from Deutsche’s global ambitions and its aim to be Europe’s main rival to Goldman Sachs. One year ahead of Deutsche’s 150th anniversary, Mr Sewing is refocusing the lender on its historic foundations — financing German and European corporate clients and domestic retail banking.
“The announced measures are a crash diet,” said Alexandra Annecke, fund manager at Germany’s third-largest asset manager Union Investment, adding that the steps were necessary and overdue.
Without naming any individuals, Mr Sewing harshly criticised his predecessors at the top of Deutsche during a call with journalists. He accused them of creating a “culture of poor capital allocation” and chasing revenue for the sake of revenue.
Mr Sewing promised that this would end with the new strategy, as the bank “will only operate where we are competitive”. He also told analysts that he will invest a “substantial amount” of his fixed salary into Deutsche Bank shares. Details about that move will be announced on July 24 with the lender’s second-quarter results.
Deutsche will create a new bad bank — dubbed a “capital release unit” — comprising €74bn of risk-weighted assets, equivalent to €288bn of leverage exposure on the balance sheet. The lender expects to finance the €7.4bn of restructuring costs without a capital increase, helped by lowering its minimum capital levels and suspending its dividend for two years.
It also hopes that asset disposals will allow it to return €5bn to shareholders either via special dividends or share buybacks from 2022. “This may yet prove optimistic,” Citi analysts wrote in a note to clients, adding that the likelihood of dividends or buybacks after 2022 was “very slim”.
Kian Abouhossein, JPMorgan analyst, said that Mr Sewing’s plan was “bold and credible”, adding that the key question now was: “Can they execute?”
Additional reporting by Anna Gross and Salome Pkhaladze in London