This comes as he seeks to win back investor confidence following the breakdown of takeover talks with Commerzbank
FRANKFURT • Deutsche Bank AG CEO Christian Sewing signalled “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 during prepared remarks at the bank’s annual shareholders’ meeting in Frankfurt yesterday. 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 foreign-exchange, global credit trading and US 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 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 yesterday, after its finance chief told German daily BoersenZeitung that revenue this year hasn’t been “as we would have wished” so far. The stock has slumped more than 40% in the past year.
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 the CEO 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 yesterday, saying the business will get greater independence and the “freedom and the resources to fully exploit its potential”.
Sewing’s speech also highlighted the achievements of two other top executives who were promoted relatively recently, DWS Group CEO Asoka Woehrmann and COO 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. — Bloomberg