Deutsche Bank CEO Signals 'Tough Cutbacks' to Investment Bank





(Bloomberg) -- Deutsche Bank AG Chief Executive Officer Christian Sewing signaled "far-reaching changes," including significant cuts to the investment banking unit, as he seeks to win back investor confidence following the breakdown of takeover talks with Commerzbank AG.

"I can assure you: we are prepared to make tough cutbacks" to the investment bank, Sewing said Thursday in prepared remarks at the bank's annual shareholders' meeting in Frankfurt. The CEO said he's "rigorously focusing" on profitable and growing businesses.

Sewing didn't say where the cuts would be, but he highlighted businesses where they're unlikely to happen, such as origination and advisory as well as as foreign exchange, global credit trading and U.S. commercial real estate. He didn't mention equities trading, an omission that was intentional, according to a person familiar with the matter.

The CEO has sped up cuts to the struggling investment banking unit since taking over last year, but the measures failed to lift the stock. Encouraged by the German finance minister, Sewing explored a merger with Commerzbank AG to end what Deutsche Bank has called a "vicious circle" of declining revenue, sticky expenses, a lowered credit rating and rising funding costs, but the talks collapsed last month. That's left investors guessing what's next for Germany's largest bank.

Shares of Deutsche Bank fell to a fresh record low before the speech, declining as much as 4% in Frankfurt, after its finance chief told German daily BoersenZeitung that revenue so far this year hasn't been "as we would have wished." The stock has slumped more than 40% in the past year.

Transaction Bank

Several large investors as well as analysts have long called for stronger cuts to the investment bank, which consumes most of the bank's capital but hardly makes a profit. New regulations after the financial crisis have made the business costlier to conduct, while negative interest rates in Europe erode other sources of income.

Bloomberg reported last week that Deutsche Bank is considering deep cuts to the equities trading business and more limited ones across the rest of the investment bank, and that Sewing is looking to give more visibility to a unit that provides cash management and trade finance to companies, a bright spot in the investment bank.

Sewing highlighted that business, known as the global transaction bank and led by Stefan Hoops, in his speech Thursday, saying the business will get greater independence and the "freedom and the resources to fully exploit its potential."

Achleitner's Backing

Sewing's speech also highlighted the achievements of two other top executives who were promoted relatively recently, DWS Group CEO Asoka Woehrmann and Chief Operating Officer Frank Kuhnke. He didn't mention any other executives, even though several of them, including investment banking head Garth Ritchie and Chief Regulatory Officer Sylvie Matherat, have come under criticism.

Under Chairman Paul Achleitner, Deutsche Bank has made a series of cutbacks to parts of the investment bank, while trying to maintain the core business. Achleitner, in a separate speech prepared for the meeting, said Sewing has the full support of the board of directors for his measures. The chairman, seen as a backer of a big investment banking unit, has come under increasing criticism for his oversight of the bank.

(Updates with CFO comments, details on planned changes, from fifth paragraph.)

To contact the reporter on this story: Steven Arons in Frankfurt at sarons@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Christian Baumgaertel

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.

COMMENTS

More Related News

WeWork Is Likely to Delay IPO After Valuation Plummets
WeWork Is Likely to Delay IPO After Valuation Plummets

WeWork, with its estimated valuation crashing, is likely to postpone its public listing until at least October, according to people familiar with the matter. No final decision has been made and the timing could still change, said the people, who asked not to be identified because the deliberations weren't public. Representatives for New York-based WeWork didn't respond to a request for comment.

India
India's Reliance Communications' Unit Files for Bankruptcy

A unit of Reliance Communications Ltd., Anil Ambani's distressed telecom firm, has filed for bankruptcy protection. GCX Ltd., which owns the world's largest private undersea cable system, is the latest company owned by the tycoon to stumble. The former billionaire's Reliance Communications itself fell back into bankruptcy earlier this year.

The Oil Market
The Oil Market's Reaction to Saudi Arabian Attack in Five Charts

It surpasses the loss of Kuwaiti and Iraqi supply during the Gulf War in August 1990, and the hit to Iranian output in 1979 from the Islamic Revolution, according to the International Energy Agency. The price gap between Brent for delivery this November and December 2020 doubled from $3.57 a barrel at the close of trading Friday to more than $7 on Monday. Calls on West Texas Intermediate crude futures are pricier than puts for the first time since 2018.

U.S. Stock Index Futures Slide After Oil Jumps on Drone Attack
U.S. Stock Index Futures Slide After Oil Jumps on Drone Attack

S&P 500 Index futures expiring in December dropped as much as 0.8% as of 9:25 a.m. in Singapore. Brent crude soared as much as 19.5% and West Texas Intermediate added 15.5% after the news of the attack on the world's largest crude exporter. The Saudi Arabia attacks will likely hurt Asian stock markets today with the S&P e-mini futures already lower, Jeffrey Halley, a market analyst at Oanda Asia Pacific Pte, wrote in an email.

Oil Soars, Yen Gains After Saudi Oil Field Attacks: Markets Wrap
Oil Soars, Yen Gains After Saudi Oil Field Attacks: Markets Wrap

(Bloomberg) -- Oil surged along with the yen and Treasury futures after a strike on the heart of Saudi Arabia's oil production increased geopolitical risk concern. U.S. equity futures declined, while shares in Asia opened flat.Brent crude soared 13% and West Texas Intermediate added 12%. News of the

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Economy

facebook
Hit "Like"
Don't miss any important news
Thanks, you don't need to show me this anymore.