FRANKFURT, Germany (AP) — Germany’s struggling Deutsche Bank said last Sunday it would cut 18,000 jobs by 2022, downsizing its volatile investment banking division in a restructuring aimed at restoring consistent profitability and better returns to shareholders.
The Frankfurt-headquartered bank said it would cut roughly a quarter of its total annual costs, from EUR22.8 billion last year to EUR17 billion, through steps such as dropping the investment bank’s stock-trading business.
It also plans to slim the division focussed on fixed-income investments.
The aim is to focus on areas where the bank is among market leaders, and on businesses with steadier earnings such as serving corporate customers.
For years, Deutsche Bank has wrestled with regulatory penalties and fines, high costs, weak profits and a low share price. The bank went three straight years without turning an annual profit before recording positive earnings of 341 million euros for 2018. CEO Christian Sewing took over last year and promised faster restructuring after predecessor John Cryan was perceived to have moved too slowly.
Deutsche Bank shares rose 2.5 per cent last Friday to 7.18 euros as markets anticipated a restructuring announcement. That is far below levels from mid-2015, when the shares traded over EUR30 per share. Shareholders received a dividend of only 11 cents per share for 2017 and 2018.
The bank said one-time charges from the changes would mean a net loss of EUR2.8 billion in the second quarter. Excluding the charges, net profit would have been about EUR120 million.
The restructuring follows the failure in April of merger talks with German rival Commerzbank. Deutsche Bank said the combination would not make business sense, but that left open the question of what strategy the bank could pursue to make its business leaner and more profitable.
As part of the restructuring the bank said it would create a separate unit to dispose of billions in investments that are less profitable or no longer fit its strategy. The bank said it did not expect to have to raise additional capital from shareholders.