Welcome to plan C for Deutsche's corporate and investment bank
Surprise!!!!!!!!!!! A new round of job losses is almost certainly coming soon to a Deutsche Bank office near you. With Deutsche's share price at a new-new low, CEO Christian Sewing is preparing to take action.
In a speech today at Deutsche's AGM, Sewing spread his cards on the table. Although today's speech wasn't presented as a whole new strategy to replace the one articulated by Sewing last year, there were some important pieces of information which could determine the longevity of DB jobs in the very near future.
1. Your business must be profitable
Remember that alleged (according to JPMorgan) €200m-300m loss in Deutsche's U.S. equities business last year? In future, it seems this kind of thing will not be tolerated.
Sewing didn't mention U.S. equities specifically today, but he did say that in future Deutsche will be focusing its corporate and investment bank on businesses that are, 'profitable on their own, without including any revenue synergies with other areas.' If you work in U.S. equities, this is surely ominous.
2. Your business must generate a 10% return on equity, or close to it
Sewing reiterated today that Deutsche wants to achieve a 10% return on equity, as per his previous stated target for the bank. However, he also suggested that he wants each of Deutsche's major business areas to achieve this target. The private and commercial bank is "on track" to do this. But the corporate and investment bank only mustered an anemic 0.6% in the first quarter.
Some areas of the corporate and investment bank deliver an "appropriate" return on equity already, said Sewing - citing FX, credit, and U.S. commercial real estate. Others clearly do not.
3. Your business must generate synergies for other areas of the bank
Sewing's new-new strategy is also focused on business areas that benefit more than just themselves. Sewing said that one example of this is the origination and advisory business (the investment banking division), which helps "build and retain relationships on the c-suite of our corporate clients." So anyone there should be fine.
4. Eradicate duplications in the infrastructure operation
As a bank with a tendency to attract the wrong sort of attention from regulators, it might be supposed that Deutsche will be adding staff to its compliance and risk functions. In fact, Sewing said today that DB plans to mesh divisions and eliminate overlap.
"We will combine parts of our Compliance area and our Anti-Financial Crime unit with Non-Financial Risk Management," said Sewing, adding this will, "cut out duplication, save costs substantially and simultaneously improve controls." - This may be so, but it sounds like jobs will go in the process.
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