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29Oct15


Deutsche Bank to Cut 35,000 Jobs Under New Strategy


Deutsche Bank said on Thursday that it planned to cut as many as 35,000 jobs through internal cuts and the sale of businesses over the next two years as part of an overhaul by John Cryan, the bank's new co-chief executive, to simplify the lender and improve its returns.

As part of its revamping, the German bank, which has a big presence on Wall Street, plans to shut its operations in 10 countries, cut the numbers of its investment banking customers in half and modernize its technology. It also plans to close 200 branches in Germany.

Also Thursday, Deutsche Bank reported that it had lost 6.02 billion euros, or about $6.6 billion, in the third quarter.

The loss, which the bank warned investors about this month, was primarily driven by a write-down after a decline in the paper value of two of its businesses, as well as charges for regulatory investigations and litigation.

"Deutsche Bank does not have a strategy problem. We know exactly where we want to go," Mr. Cryan said at a news conference in Frankfurt on Thursday. "However, for many years now, Deutsche Bank has had a serious problem with executing the strategy."

Mr. Cryan joined the bank as co-chief executive in July, succeeding Anshu Jain, who had led efforts to make the bank a dominant player on Wall Street. Mr. Jain resigned in part because of pressure from shareholders unhappy about inconsistent profits. The bank's other co-chief executive, Jürgen Fitschen, has said he will resign next year.

The strategy reboot, called Strategy 2020 by Deutsche Bank, is the latest move by the lender this year to turn around its fortunes. Shareholders have complained the bank is too complicated and not profitable enough.

Many of the bank's closest European rivals have announced plans to shrink their investment banking operations and put more focus on less risky and less capital-intensive business lines, like asset management.

This month, Deutsche Bank announced a series of management changes and plans to split its investment bank in two, with one part focusing on corporate and investment banking and the other on sales and trading.

The bank said on Wednesday that it was suspending its dividend for the 2015 and 2016 fiscal years to help it meet new financial targets as part of its overhaul.

The lender said it planned to cut its annual costs, excluding litigation, revamping and other charges, to less than 22 billion. The company booked expenses of 27.7 billion in 2014.

About 3.8 billion of the savings is expected to come from internal cuts and another 4 billion from the disposal of businesses, the lender said. The company is expected to record revamping and severance costs of about 3 billion to 3.5 billion with its cost-cutting plans.

Mr. Cryan said the lender viewed the cost cuts as "realistic" and necessary to remain competitive, rather than "ambitious."

On Thursday, Deutsche Bank said it would cut 9,000 full-time positions internally and eliminate about 6,000 external contractor positions in its information technology and operations infrastructure.

The bank said it also expected to cut an additional 20,000 positions through selling or exiting businesses in the next two years, saving it about 4 billion a year. Those disposals include its planned spinoff of Postbank, which offers retail banking services from German post offices.

The company has about 100,000 full-time employees and an additional 30,000 contract workers, Mr. Cyran said on Thursday.

As part of its overhaul, Deutsche Bank said that it planned to streamline its branch network in Germany and parts of Europe. It planned to close its on-the-ground operations in Argentina, Chile, Denmark, Finland, Malta, Mexico, New Zealand, Norway, Peru and Uruguay.

It also said it would move its trading operations in Brazil to its global and regional hubs and further centralize back-office operations as part of its new investment banking structure. The bank made a similar move to scale back its investment banking operations in Russia in September.

In total, the bank said, it would eliminate about 90 legal entities within the institution.

The lender said it would seek to reduce its investment banking clients by about 50 percent, especially in countries with higher operating risk.

"Approximately 30 percent of clients produce 80 percent of the revenues in these business divisions," the company said.

Another area of focus will be improving the company's technology, which Mr. Cryan called "outdated and fragmented."

Mr. Cryan said the most impressive thing he had seen since joining Deutsche Bank was "how good the people are."

"We have these lousy systems, very slow processes, a terrible inefficient internal organization, and the people more than make up for that," he said.

Among the financial targets unveiled Wednesday, the lender said it was aiming for its so-called common equity Tier 1 capital to be equivalent to at least 12.5 percent of its assets from the end of 2018. That number was 11.5 percent at the end of September.

Deutsche Bank said it would seek to resume paying a dividend to shareholders in 2017 "at a competitive payout ratio."

On Thursday, Deutsche Bank reported a loss of 6.02 billion in the three months that ended Sept. 30. That compared with a loss of 92 million in the third quarter of 2014.

The loss was primarily driven by 5.8 billion in charges related to the write-down of intangible assets, or paper losses on two of its businesses. The bank also booked a charge of 649 million as it wrote down its 19.99 percent stake in Hua Xia Bank of China and 1.2 billion in litigation charges.

The lender said that its litigation reserves were increased by 1 billion in the quarter, totaling 4.8 billion.

Among its litigation and regulatory issues, Deutsche Bank is preparing at least $200 million to resolve investigations into its dealings with countries like Iran and Syria, according to officials briefed on the matter. The settlement with New York State's financial regulator and the Federal Reserve could be announced as soon as next week.

Although large, the loss was slightly better than Deutsche Bank's initial forecast this month, which called for a loss of as much as 6.2 billion in the third quarter.

The company said its revenue had declined 7 percent to 7.33 billion in the third quarter, from 7.86 billion in the same period a year earlier.

Excluding the effect of the write-down of its stake in Hua Xia Bank, Deutsche Bank said its revenue in the third quarter had been comparable to the same period last year despite "challenging market conditions."

[Source: By Chad Bray, The New York Times, 29Oct15]

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