Although termed as part of cost cutting measures, Deutsche Bank's (NYSE:DB) plans to eliminate or even possibly reduce of its common dividend for 2015 said to have been triggered by a massive €6.4 billion quarterly loss, chiefly caused by a loss of value for its subsidiary Postbank, which in turn came about by a loss of goodwill. The Frankfurt-based investment banking major also plans to shed about a fourth of its total staff, which amounts to about 23,000.
Fresher inputs by the new CEO
A reduction in total operating costs was one of the stated aims of John Cryan, who came aboard as CEO in July. His roadmap outlines a lowering of expenditure by as much as 15% and offloading assets by about 17%, all in the next five years. Cryan's strategy does not involve asking shareholders for funds, saying that "raising additional capital would not solve our core problem of reversing our low financial returns and our poor organic capital generation".
Analysts say Deutsche Bank, which literally means 'German Bank' and is currently Europe's largest investment bank, is readying to leave countries in entirety after disposing off their assets in these nations. It currently operates in 72 countries worldwide. Another acquisition, U.S. lender Bankers Trust has not fared well either, and its value has also been written down, just as in the case of Postbank. It also has to deal with a bill of $1 billion in connection with litigations, as it adopted riskier asset classes when compared to its peers in the banking industry.
Not an easy road ahead
Adding to its woes, Deutsche Bank had also taken a 20% stake in Hua Xia Bank earlier, and it has seen this slide by a whopping €600 million as well. It faces scrutiny into its deals with Iran, while a probe is underway to determine if it had manipulated benchmark currency rates. A further 1.2 billion euros have also been set aside for settlements and payment of fines.
Share prices had declined by 7% following John Cryan's statement about writing down the value of Postbank, a German retail banking operation it acquired in 1999, and turned to during the global financial crisis to vary its funding mix by increasing consumer deposits. This drop was on top of falling share value, a sentiment observed over the past twelve months. However investors have welcomed the bank's moves to restructure itself, and share prices has started increasing. Recent developments also point to the bank selling off British insurer Abbey Life, which could potentially bring in £3 billion or $4.6 billion.