Deutsche Bank cuts more to fight earnings plunge

Deutsche Bank

"However, we are not strong enough in other areas of this business", he added. A Deutsche Bank veteran who started as an apprentice, Sewing is accelerating a push to refocus the lender on its European home market and reverse a two-decade effort to compete head-to-head with the large Wall Street firms that dominate volatile securities trading.

Deutsche's plans will result in significant headcount reductions in the United States and Asia.

By 1240 BST, Deutsche Bank share were 1.97% lower at €11.75.

In a letter to employees that was published on the bank's website alongside the announcement, Sewing hinted at upcoming changes to the company, including pulling back from "not sufficiently profitable" areas in its investment banking business. It will eliminate jobs in its investment bank, describing the cuts as a "material workforce reduction" through the rest of this year, without providing numbers.

This drastic decision follows the laying off of the previous CEO, John Cryan, and the appointment in his place of Christian Sewing, who has spent his entire career in Deutsche Bank: "We must act decisively to correct our strategy". In U.S. rates sales and trading, it plans to shrink the balance sheet, leverage exposure and repo financing. "The focus right now is on execution, making sure we move quickly to adjust the businesses to that core perimeter". "What the restructuring is missing is details for now". This was mainly caused by currency rate fluctuations, Euro's strength against the U.S. Dollar and low revenues from corporate and investment banking.

Paul Achleitner, now Deutsche Bank's supervisory board chairman, advised it on the purchase while at Goldman Sachs Group Inc. HSBC downgraded Deutsche Bank from a "buy" rating to a "hold" rating in a report on Monday, January 8th.

Yet the aggressive expansion eventually led to a spate of legal scandals that took Cryan a good part of his three-year tenure to clean up.

For years it has tried to compete with the major Wall Street investment banks, but now Deutsche Bank, the leading German bank, has chose to throw in the towel and is preparing for a withdrawal from the American and Asian markets to focus on European customers. Sewing has called the target "non-negotiable" in a memo to staff sent earlier in April. The firm presently has a $16.00 target price on the bank's stock. The bank had a net profit of 575 million euros ($700 million) in last year's first quarter.

"Delivery is key from here", said Guy de Blonay, a fund manager at Jupiter Asset Management. Its German home market trails the USA and U.K.in retail- and investment-banking profitability, and compared to its big Swiss rivals, Deutsche Bank lacks scale in private banking and wealth management.

1Q sales and trading revenue EU2.45 billion, down 17%.

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