The German giant is severing ties with clients that are straining the bottom line, and will focus on the more profitable customers.
Deutsche Bank is confirming that it will be parting company with 3,400 clients that have been determined to a strain on the bank’s bottom line, confirms the German institution’s CEO John Cryan in a message to employees dated Dec. 6.
The confirmation follows a report in The Wall Street Journal (WSJ) about the cost-cutting effort, which bank officials were declining to comment upon until Cryan’s acknowledgment.
The initial announcement took place last week via an internal memo to equity sales and sales trading staff, according to the WSJ.
“In Global Markets, we are parting with 3,400 trading clients,” Cryan says in his current statement. “What may appear to be bad news is actually the opposite. Garth Ritchie and his team took this deliberate step after recognizing that a high proportion of our revenue in this business is generated by a small number of clients. An essential part of our Strategy 2020 is to become focused and less complex. That’s why we will focus on clients that use and rate our services the most.”
Cutting clients such as hedge funds, as reported in the WSJ, is a component of a cost-reduction effort intended to help with long-term stability. In the past, the bank has noted that it would be trimming its list of trading clients, but gave no indication of the timing or depth of the severed business ties.
This latest move by Deutsche Bank follows another cost-cutting effort — the elimination of “another 1,000 jobs” after reaching an agreement with its group and general works councils “on role reductions in Germany.” The move is a key step in the bank’s Strategy 2020, which calls for the elimination of 9,000 people from its work force.
If the layoffs and wrenching business changes weren’t enough, negotiations have been underway since October between Deutsche Bank and the U.S. Department of Justice (DOJ) over an effort to resolve civil claims related to the German bank’s issuance and underwriting of residential mortgage-backed securities (RMBSes) and related securitization activities between 2005 and 2007.
The WSJ broke the story that delineated the settlement talks between the bank and the DOJ, including the potential penalty of $14 billion, which Deutsche Bank declared it would not pay.
“After announcing the agreements on the reduction of 3,000 jobs roles in June 2016, another 1,000 jobs will now be reduced,” according to a press release issued by the bank. “This brings the total number of role reductions in Germany to around 4,000. These are part of 9,000 jobs being reduced worldwide to make the Group more competitive as part of Strategy 2020.”
Bank officials add that the first round of “negotiated agreements in June” were mainly from the private and commercial banking business in Germany, and have been implemented. The negotiations for the second and third rounds “covered around 450 jobs” in the bank’s Chief Operating Office, an infrastructure function, according to the bank.
Other job cuts have come from the human resources department, Communications and Corporate Social Responsibility, Deutsche Asset Management, Global Markets and Corporate Finance and DB Research, the macroeconomic research unit, bank officials confirm.
“We’re now hitting the home stretch of a challenging year,” Cryan says in his December message. “Please remain as engaged as you have been. In recent weeks we have shown how resilient we are and this is very much a consequence of your commitment.”
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