Morning Coffee: The big danger for the 'transformed' Deutsche Bank. Goldman Sachs' ping pong king is back
Deutsche Bank is dead, long live Deutsche Bank. The biggest German bank is embarking upon what the New York Times says is the most significant bank restructuring since JPMorgan announced plans to cut 17,000 jobs in 2013. At DB, 18,000 jobs are going, with a focus on the investment bank. Starting this morning.
Equities sales and trading will bear the brunt of the blow, although insiders suggest that some specialist research and distribution teamswill remain to support a shrunken equity capital markets business. Rates trading desks are being slimmed down. Infrastructure is being cut. M&A advisory teams, credit sales and trading teams, FX traders and technologists are more likely to be fine. – In a letter to staffyesterday, CEO Christian Sewing said the bank plans to spend an additional €13bn on technology by 2022 and that “no sacrifice” will be made to control functions (although compliance and financial crime are being combined as previously reported.)
It’s a big change from Sewing’s previous strategy – still articulated on the bank’s investor relations page this morning – of “controlled growth.” Under what the Financial Times notes is Deutsche Bank’s fifth strategic plan in seven years, Deutsche is now practicing controlled shrinking. In yesterday’s letter to employees, Sewing said the aim is a post-tax return on tangible equity of 8% by 2022. “It is absolutely vital that we achieve this if we want to be competitive in the long term,” he said.
Is this, then, the definitive fix? The New York Times points out that Sewing’s strategy carries risks – not least that the bank sinks into a vicious circle of declining revenues and declining profits.
There’s also the risk that even Sewing’s special staff decide they’ve had enough. Cuts in equities seem likely to be front-loaded, withBloomberg reporting yesterday that 50% of Asian equities staff will go “immediately” with the rest going later this year. However, with severance and restructuring payments of €7.4bn ($8.3bn) being strung out until 2022, the implication is that this could be a long process, and not everyone will want to stay around to see it through.
Deutsche might welcome some voluntary departures, but what if staff leave in focus-areas like fixed income trading or advisory? Some bankers say they’ve already been contacted by DB clients indicating their willingness to maintain relations if they move to new homes. And although Deutsche’s bankers and traders appear to respect new bosses Mark Fedorcik and Ram Nayak, Sewing seems set on turning Deutsche Bank into a kind of Teutonic HSBC – which isn’t what many of Deutsche’s current employees signed up for.
Separately, the ping-pong wizard is back. Michael Sherwood, the former head of Goldman Sachs International (Goldman’s business in the UK and Europe) is reportedly joining digital bank Revolut as a non-executive director. Sherwood, who is a very keen table tennis player has seemingly spent the past few years indulging his table tennis passion and evangelizing for the support with philanthropic donations. He may want to install some tables at the notoriously hard-driving Revolut.
Garth Ritchie won’t official leave Deutsche Bank until the end of November. (WSJ)
Garth Ritchie could get an €11m payoff. (The Times)
Goldman analyst: “There is a substantial difference between downsizing and outright closure of Deutsche’s non-European equity capacity….An outright closure [of the US operation] would raise questions about its capacity to act as a global investment bank to its European corporate client base.” (Financial Times)
Rival banks are being deluged with Deutsche Bank CVs. (Financial News)
When Christian Sewing made a presentation to clients he brought along Klaus Rosenfeld, head of Schaeffler Group, one of the world’s leading suppliers of ball bearings and car parts and a large German corporate. This is where Sewing wants to play. (Financial Times)
Cleared ex-Deutsche Bank Andrea Hauschild took a holiday to Italy last year with his wife. He was plucked from his hotel by Italian police who put him in the notorious San Vittore prison following allegations that he, conspired to ‘fix a key benchmark rate.’(Bloomberg)
Deutsche Bank hired a new head of FX sales from Goldman Sachs. (Financial News)
Newly qualified lawyers in London are getting salaries of £100k. (RollonFriday)
Hedge funds like Boris Johnson and have been backing his attempt to become British prime minister. (Financial Times)
Rich Ricci, formerly of Barclays, made £4.4m ($5.51m) in a year after backing the Aquis exchange. (The Times)
Some fancy Python libraries for data science. (Analytics Vidyha)
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