Flagging revenues and profits and now Brexit are taking their toll on the German institution.
Deutsche Bank, Germany’s largest bank, reached an agreement with its work council to cut 3,000 jobs and close a quarter of its branches in Germany as part of its five-year restructuring plan announced last October.
More than 80 percent of the layoffs will be in its private and commercial clients division, which the German bank said is being revamped to “deliver high-quality service while expanding new forms of digital services.”
The closures represent 26 percent of the total domestic branch network, leaving it with 535 branches, slightly higher than the original target of 500, bank officials say. It will start closing down 188 of its smaller branches before the end of the year, with the bulk to be shut in the first half of 2017.
According to Christian Sewing, head of retail for the bank, the closures are in order to “meet challenges of low-interest rates, tougher regulation and especially a changed behavior of customers.” He added that the job cuts — which the bank hopes to carry out without forced redundancies — were needed in order to maintain competitiveness.
The announcement did not come as a surprise and was part of the bank’s “Strategy 2020,” which will see the elimination of a total of 9,000 jobs, or about 9 percent of the global workforce, including some 4,000 positions in Germany.
Deutsche Bank will discuss job cuts at other businesses in a second round of talks with its work council, with a third one scheduled for later in the year.
Overall, the bank plans to close operations in 10 countries including Mexico, Norway and New Zealand and reduce the number of its investment bank clients. It has already shut about 40 retail branches on the European continent, mainly in Spain and Poland.
As of the end of March, the bank employed 101,445 people, including 46,036 in Germany, according to official filings. The bank is also scrapping its dividend and looking at other asset sales to bolster flagging revenues and profits — it reported a record €6.8 billion ($7.5 billion) loss last year.
The restructuring plan is aimed at reversing Deutsche Bank’s ailing fortunes although the strategy has not yet allayed concerns over the bank’s financial health. Its share price has lost almost two-thirds of its value since hitting a high of €32.31 ($35.91) last August, as investors are concerned over the pressures on global banks as well as Deutsche’s own legal and structural issues. The latest plunge — almost 20 percent — came in the wake of the Brexit vote late last week.
The New York-based Soros Fund Management, founded by George Soros, who is also chair of the firm, and Marshall Wace, a British hedge fund, both successfully shorted the bank’s stock to the tune of 0.51 percent each last Friday, according to regulatory filings. This is not the first time Soros won a windfall — the veteran investor famously made $1 billion betting against the pound in 1992.
Deustche Bank, though, will not be the only one feeling the Brexit pain.
An analyst note published by investment banking giant Goldman Sachs estimated that European banks’ net income from 2016 to 2018 will be €32 billion ($35.56 billion) less, while U.K. banks’ net income will drop €10 billion ($11.12 billion).
The banks that stand to be impacted the least will be those in the Benelux (Belgium, the Netherlands and Luxembourg) and Nordic institutions.
Need a Reprint?