FRANKFURT/SYDNEY/HONG KONG: Deutsche Bank shares rose on Monday as it launched one of the biggest overhauls of its investment bank since the financial crisis by cutting 18,000 jobs around the world, starting the day with cuts in Asia.
The lender announced the job losses on Sunday as part of a restructuring plan that will cost €7.4 billion ($8.3 billion, Dh30.5 billion) and see it undo years of work that had aimed to make its investment bank a major force on Wall Street.
As part of the overhaul, the bank will scrap its global equities business and cut some operations in its fixed income, an area traditionally regarded as one of its strengths.
Shares in Deutsche Bank opened up more than 3 per cent in Frankfurt to reach their highest value since May 2.
Deutsche Bank CEO Christian Sewing, who has called the shake-up a “restart” for the bank, is due to speak to the media initially and then address analysts later on Monday.
Deutsche said the restructuring would push the bank into a loss this year, meaning it will have been in the red four out of the past five years. It was unclear when it would return to profit.
Analysts at JPMorgan called the plan “bold and for the first time not half-baked” but said questions remained, including about credibility of execution, revenue growth details and employee motivation.
Ratings agency Moody’s said the bank faced “significant challenges” to executing the plan swiftly and said it would keep its negative outlook on the flagship German lender.
“It’s a risky manoeuvre, but if it succeeds, it has the potential to bring the bank back on course,” said a person close to one of the top 10 biggest shareholders.
Deutsche Bank gave no geographic breakdown for the job cuts, though the bulk are widely expected to fall in Europe and the United States. The global working day on Monday began with cuts in Sydney, Hong Kong and elsewhere in the Asia-Pacific.
Bankers seen leaving Deutsche Bank’s Sydney office on Monday said they had been laid off, but declined to be identified as they were due to return later to sign redundancy packages.
One person with knowledge of the bank’s Australia operations said its four-strong equity capital markets (ECM) team was also being disbanded. But the person also said most of its mergers and acquisitions (M&A) team was not immediately affected.
Entire teams in sales and trading were losing their jobs too, according to several Deutsche bankers.
Regionally, Deutsche used to rank among the top 10 banks in league tables for ECM deals, but it had slipped in recent years, hitting 17th last year and 18th in 2019, Refinitiv data showed.
So far this year, it ranks 8th regionally for M&A activity.
Deutsche had some 4,700 staff at its main regional offices in Sydney, Tokyo, Hong Kong and Singapore, factsheets on its website showed.
Its investment banking team for the Asia-Pacific region had about 300 people before the cuts, of which 10 per cent to 15 per cent will be laid off, almost all in its ECM division, said a senior Asia banker with direct knowledge of the plans.
One laid off equities trader in Hong Kong said the mood was “pretty gloomy” as people were called in to meetings. “They give you this packet and you are out of the building,” he said.
Several workers left offices holding envelopes with the bank’s logo. Three employees took a picture of themselves beside a Deutsche Bank logo outside, hugged and then hailed a taxi.
“If you have a job for me please let me know. But do not ask questions,” said one Deutsche employee, declining to comment further.
A bank spokeswoman would not comment on specific departures but said the bank would be communicate directly with employees and would be “as responsible and sensitive as possible implementing these changes.”
“This is a restart,” Sewing said on Sunday, describing the initiative as most fundamental transformation in decades.
“We are creating a bank that will be more profitable, leaner, more innovative and more resilient,” he wrote to staff.
The bank will set up a so-called bad bank to wind-down unwanted assets, with 74 billion euros of risk-weighted assets.
Sewing will represent the investment bank on the board in a shift that illustrates the division’s waning influence.
The CEO had flagged the restructuring in May, promising shareholders “tough cutbacks” to the investment bank. It followed Deutsche’s failure to agree a merger with rival Commerzbank AG.
“The new investment bank will be smaller but more resilient, with a focus on our financing, capital markets, advisory services and sales and trading businesses,” Asia-Pacific Chief Executive Werner Steinmueller said in a memo to staff on Monday.
One senior banker, still in a job, questioned how well the slimmed down franchise could compete in future.
“The biggest question for us is where do we go from here if we don’t offer the whole suite of products. Will clients stick with us or is the game over?” he said.