New fears that Deutsche is cutting 25% of people at its investment bank
Suddenly, the situation at Deutsche Bank looks a lot more "startling". What began as some "light cutting" in U.S. equities and rates trading, as the elimination of U.S. and Asia-focused corporate finance roles, as an exit from peripheral prime broking relationships, and as the ongoing burning of contractors, has suddenly morphed into what the Wall Street Journal reports could be 10,000 job losses across the bank as a whole.
Deutsche isn't commenting on the cuts, which would "only" be 10% of its total staff. However, Deutsche's corporate and investment bank (CIB) itself only employed 40,203 people at the end of the first quarter and new CEO Christian Sewing's only strategy statement to date has focused on the need to restructure the CIB above all else. At worse, the implication is that Sewing's Deutsche wants an investment bank that's 25% smaller in terms of headcount.
While cuts of this extent would clearly be very painful for anyone at DB, there are many in the industry who would suggest it's about time. In the past few years, Deutsche has relentlessly added staff. Nearly 1,500 were added in the 12 months to March 2018 alone.
Bloomberg offers some insight into the likely nature of the cuts. It reports that Deutsche is "reassessing" its CEEMEA business and has already dispensed with Darren Veenhuis, the head of equities sales for the region. Gone too is Pascal Moura, who runs equity research for Dubai. At the same time, Bloomberg suggests Deutsche will "sharply reduce" its equities presence in the U.S., where it has 9,000 staff in total.
Deutsche isn't commenting. But all is expected to become clear on tomorrow, when the bank issues a statement to coincide with its shareholder meetings. In the meantime, the Financial Times suggests that while the investment bank will bear the brunt of the cuts among Deutsche's units, just half the new job cuts are likely to fall there.
Deutsche insiders said the bank is likely to cut more deeply than just U.S. and CEEMEA equities - and it will clearly need to do so if it intends to eliminate 10k in headcount from the CIB. Garth Ritchie, co-head of the corporate and investment bank is understood to have told members of the bank's London equities solutions business that they too were under review at a town hall meeting following Sewing's appointment. There are suggestions that anyone dealing with clients beyond top 25-30 most important accounts will be jettisoned. Fixed income cuts are also thought to be on the table - in London and in New York. Some of the cuts stand to effect people who were only recently hired - Deutsche was expanding its Dubai equity research team just two years ago and made eight senior hires to its U.S. equities business only last year.
Even so, the sudden increase in the extent of likely layoffs isn't troubling everyone. Despite making ominous noises about its prime broking business (and allegedly cutting people like Alison Dayton in London), Deutsche is understood to be moving Angharad Fitzwilliams back from Asia to run prime broking sales in the City. In credit, the bank recently promoted veteran credit trader John Pipilis as head of fixed income and is said by headhunters to be both buying people back and bidding people up. Mark Fedorcik, the newly-promoted co-head of Deutsche Bank's U.S. operations, has admitted the bank is cutting poor performers but says it's also hiring, "here and there." "They're letting go of numbers and hiring-in assets," says one credit headhunter, speaking off the record, and referring to Deutsche staff. Another says he hasn't encountered many DB London people with "panic written on their faces" - yet.
If Deutsche announces 10k job cuts in its corporate and investment bank tomorrow morning, this could all change. Cuts of this magnitude would put Deutsche on a par with UBS which announced 10,000 job cuts of its own six years ago.
The irony will not be lost on former CEO John Cryan. The WSJ says cuts of 5,000 across the bank were posited in April last year, but that these didn't happen and that by November Ritchie and Marcus Schenck (then co-head of the investment bank) were instead aiming for an increase of 700 staff. Ritchie is still around, while Cryan himself is said to have wanted to make big cuts to the corporate and investment bank - but to have been blocked by Paul Achleitner, the chairman of Deutsche's supervisory board, who brought in Sewing to replace him.
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