In one of its boldest overhauls to date, Deutsche Bank AG (DB, Financial) announced on Sunday it will exit its global equities sales and trading business, scale back on investment banking and cut thousands of jobs in order to improve profitability.
The struggling German investment bank, which has been plagued by scandals, investigations and massive fines related to the financial crisis and other issues in recent years, said it will reduce its workforce by 18,000 jobs to around 74,000 employees globally by 2022. It hopes to shrink adjusted costs to 17 billion euros ($19 billion) over the next several years as well.
Shares were down more than 7% before the opening bell on Monday on the news.
In a statement, CEO Christian Sewing said the restructuring plan, which is expected to cost 7.4 billion euros by the end of 2022, is necessary to “unleash” its full potential by focusing on its strengths.
“In refocusing the bank around our clients, we are returning to our roots and to what once made us one of the leading banks in the world,” he said. “We remain committed to our global network and will help companies to grow and provide private and institutional clients with the best solutions and advice for their respective needs – in Germany, Europe and around the globe. We are determined to generate long-term, sustainable returns for shareholders and restore the reputation of Deutsche Bank.”
Paul Achleitner, the chairman of the bank’s supervisory board, said the plan is the “right response to major changes and challenges in the financial industry.”
“Deutsche Bank has been through a difficult period over the past decade, but with this new strategy in place we now have every reason to look forward with confidence and optimism,” he added.
The company also announced it is changing the structure of its leadership team to give it more flexibility, accelerate decision-making processes and encourage entrepreneurship within the bank. The changes will go into effect on Aug. 1.
In addition to investment banking chief Garth Ritchie stepping down, two other board members, Sylvie Matherat and Frank StrauĂź, will be leaving on July 31. Christiana Riley, Bernd Leukert and Stefan Simon, who are currently senior group directors, will join the board following the approval of regulatory authorities.
“We have a talented and dedicated team at the helm to relentlessly execute what we promise today and to create a sustainably profitable bank,” Achleitner said. “Our shareholders have supported our bank’s restructuring for years and that’s why a substantial return of capital over time is an important part of our new strategy.”
Deutsche Bank provided projections for second-quarter results, which will be released on July 25. It expects to record a net loss of 2.8 billion euros on 6.2 billion euros in revenue.
With a market cap of $15.83 billion, U.S.-listed shares of the investment bank were trading 5.35% lower at $7.60 on Monday morning. After tumbling 57% in 2018, GuruFocus estimates the stock has fallen another 7% year to date.
Shares of its American competitors, which include Bank of America Corp. (BAC, Financial), JPMorgan Chase & Co. (JPM, Financial), Goldman Sachs Group Inc. (GS, Financial), Citigroup Inc. (C, Financial) and Morgan Stanley (MS, Financial), were also trading lower on Monday.
Disclosure: No positions.
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