Deutsche Bank AG intends to make about half its planned 18,000 job cuts in Germany as it relies on savings at the retail units to lower costs, according to people familiar with the matter.
The lender employed about 41,700 people in its home market at the end of last year, out of a total of 91,700. Outside Germany, London will also be hit especially hard, partly because of Brexit, while the U.S. may see a lower share of front-office cuts once the bank has exited its equities trading business, the people said, asking not to be identified because talks are ongoing.
Chief Executive Officer Christian Sewing in early July unveiled Deutsche Bank's most radical restructuring in recent history, with job reductions a key piece of the plan. The scale of the planned reductions in Germany may surprise analysts after the CEO had previously indicated that the country would see its "fair" share of cuts. It also comes as an economic slowdown takes hold of Europe's largest economy and the risk of a recession increases.
While Deutsche Bank has yet to detail the cuts to its retail bank - now its largest division by revenue - it's increasingly clear they will be big, too. Frank Strauss, the head of the business, left when the restructuring was announced in the summer because he didn't support the plans.
"We do not communicate details of the planned job cuts on a regional or divisional level," the bank said by email. "We are communicating directly with our works council and our employees regarding their jobs and options available to them."
The new head of the German retail unit, Manfred Knof, is currently scouring the business for cost savings. He's considering turning the unit's second headquarters in Bonn into an outpost, and he may dissolve the retail unit's separate legal structure, people familiar with the matter have said. That could save Deutsche Bank hundreds of millions of euros in compensation and regulatory expense, other people said.
A decision will happen before the bank's investor day in December, the people said. The change would need approval from financial regulators, who have so far indicated they take a positive view, one person said. They may not give their final verdict before next year, the person said.
Deutsche Bank is just one of many large lenders that have recently announced staff reductions, though its effort is the biggest by far. HSBC Holdings Plc is seeking to shed as many as 10,000 roles, largely by selling its retail operations in France, a person familiar with the matter said on Monday. Taken together, European lenders have officially announced plans for more than 50,000 job cuts year to date, according to data compiled by Bloomberg.
Past headcount reductions at Deutsche Bank have frequently included selling entire units, as the bank did with its retail operations in Poland and Portugal. But the latest plan doesn't take into account any unannounced sales, a person familiar with the matter said.
CEO Sewing had previously said that most of Deutsche Bank's planned cuts will happen by the end of 2021. While they will affect all regions where the bank operates, Germany will see "a fair share and a good share," he said. The measures may take longer there than in other countries because of labor laws.
Deutsche Bank shares fell 3% as of 12:16 p.m. in Frankfurt and have declined almost 10% so far this year.
The German job cut figure includes staff being made redundant through the merger of Postbank with Deutsche Bank's retail business, which was announced in 2017. In July, Sewing replaced Strauss with management board member Karl von Rohr. Strauss, who used to run the Postbank subsidiary when Deutsche Bank was still planning to list it on a stock exchange, was reluctant to cut costs as quickly as Sewing thought necessary, people familiar with the matter said. Strauss couldn't be immediately reached for comment.
Deutsche Bank has said the retail bank will contribute 60% of the 2.3 billion euros in cost savings it's seeking to wring from its core businesses by the end of 2022. The division's expenses are expected to fall by an average of 6% per year - far more than at any of the other divisions.
Deutsche Bank has indicated that most cuts will affect support roles and back office staff, rather than client-facing employees, as it seeks to automate workflows. It doesn't break down where those jobs are located, but it has large back-office hubs in Germany as well as in places as far apart as Florida, the Philippines and India.
The decision to pull out of equities trading will also contribute toward the job reduction goal. Deutsche Bank recently sealed an agreement with BNP Paribas SA to transfer the part of the business that serves hedge funds, including about 1,000 staff who will move to the French bank, people familiar with the matter have said.