Standard Chartered's MD dump should strike fear into senior staff at Deutsche Bank
Standard Chartered's layoffs have gone from bad to worse. Two weeks ago, Bloomberg reported that the bank was cutting 250 of 1,000 managing directors. Today, Reuters reports that the bank is actually cutting 1,000 of its 4,000 people graded from 1-4, at managing director level and above. The layoffs have grown exponentially.
Standard Chartered was unable to immediately comment on the inflationary trend, but one headhunter with links to the bank suggested that the first round of redundancies impacted front office staff in the wholesale bank while these new 750 redundancies will whack support in operations roles. "In the front office, there's already been a 10-15% reduction across the board," he claims, "We've seen people coming out of most teams, FX solutions, sales, equity solutions, you name it."
To some extent, Standard Chartered is a special case. By Winter's own admission, the bank is/was a mess. In July, he flagged up the complexity of the bank's organisational structure, which he said was leading to, "slow or no decisions and confusion about who is responsible for what." Complexity was flagged up again in Winter's memo announcing the 1,000 layoffs today. The bank is, "streamlining...eliminating management layers and duplication of roles," he said. More prosaically, Winters is stripping out dual layers of management so that local businesses and clients are managed locally and global businesses are managed globally, on a product basis.
Even so, MDs elsewhere should not be complacent. Both Credit Suisse and Deutsche Bank have management reviews approaching in the next few weeks. And Deutsche, especially, is seen as susceptible to similar simplification.
When Deutsche appointed Cryan in July, Cryan said the bank's future would be defined by, 'how well we deliver on strategy, impress clients and reduce complexity.' Three weeks later, he sent a memo stressing the need to, "reduce organizational complexity, which inhibits effective decision-making, blurs accountability and embeds wasteful cost.”
While Credit Suisse has spent the past year cutting costs and jettisoning expensive senior staff, Deutsche has been slower to act. In the six months to June, the German bank eliminated just 219 of 8,204 people from front office positions in its investment bank, or 3% of the total. Over the same period, it increased overall securities and investment banking headcount by 1,243 people to 27,079. The implication is that Deutsche has nearly 19,000 people working in support roles. The message from Standard Chartered today is that they should be feeling concerned - especially if they're expensive MDs.
Deutsche (predictably) declined to comment on what Cryan's likely to do under the 'Strategy 2020' plan to be announced on October 29th. There are rumours that Cryan is on the verge of announcing a new UK CEO to replace Colin Grassie, the ally of Anshu Jain who left in June. Amidst claims of duplication between operations functions in the UK and Germany, Grassie's replacement is expected to be instrumental in restructuring the UK business.
Deutsche's bankers will not be unaware of the risks. Banking analysts have already flagged the dangers. In a note earlier this month, Kian Abouhossein at J.P. Morgan predicted that Cryan will cut 10,000 staff and 10,000 contractors. Reuters has also suggested that Deutsche is dispensing with 30% of its technology staff. Deutsche's front office managing directors shouldn't be too complacent, however. Cryan was, after all, CFO at UBS while the bank was formulating the 2012 cull of its fixed income business.