Deutsche Bank to cut costs by €3.5 bn in strategic shift

Deutsche Bank AG plans to reduce annual costs by a further €3.5 billion, cut back its ownership in the Postbank consumer unit and shrink the securities business to revive profitability.

Deutsche Bank aims to achieve a return on tangible equity of at least 10 per cent in the medium term, the Frankfurt-based company said in a statement Monday, scrapping its previous profitability goal.

It will reduce the number of countries or local presences by as much as 15 per cent by 2020 and close up to 200 branches.

Co-chief executive officers Juergen Fitschen and Anshu Jain are implementing their biggest strategic overhaul of their three-year tenure after failing to meet previous targets. They’re under pressure from investors, battered by the worst stock performance among global peers during the co-CEO’s leadership, amid concerns about the firm’s rising legal costs and weak capital buffers.

“We must remain client-centric, but focus more sharply on mutually attractive client relationships; remain global, but become more geographically focused; and remain universal, but avoid trying to be all things to all people,” Jain and Fitschen said in the statement. The bank aims to pay at least half of profit in dividends over the medium-term, it said, without elaborating.

Job cuts?

The bank plans to reduce leverage by €150 billion at the investment bank by 2018 by cutting its businesses of long- dated uncleared derivatives and repos, while optimising rates, credit and the unit servicing hedge funds.

Deutsche Bank plans to purchase shares in Postbank it doesn’t own before selling a stake in the company to the public by the end of 2016. “This is a sensible pragmatic plan,” Christopher Wheeler, a London-based analyst at Atlantic Equities LLP, said in an interview with Bloomberg Television. “But it’s still not one that’s going to knock the cover off the ball at this point in time.” The bank could cut about 3,000 jobs at its retail-banking unit, with more being at risk at the investment bank, Michael Huenseler, who helps oversee about $16 billion at Assenagon Asset Management SA and holds the lender’s stock, said before today’s announcement.

He said Deutsche Bank probably won’t be able to get a price for Postbank above book value.

Bloomberg