Deutsche Bank (NYSE: DB) announced a restructuring plan that will cut the bank’s global appetite in order to cut expenses and boost profitability.
The German banking giant will terminate global equities sales and trading business by 2022. Investment banking activities, which make up half of revenue, will also be reduced. Shares are roughly down 7%.
Around 18,000 jobs, many based in New York City and London, will be cut by 2022. This will leave the bank with a global workforce of 74,000.
This reformation will cost USD 8.3 Billion net loss by 2022, with an anticipated USD 3.1 Billion net loss in the second quarter. There will also be the creation of a “bad bank”, a separate unit for over USD 300 Billion worth of high-risk assets.
Some many say this transformation may have been expected as the bank has been leaving a breadcrumb trail of scandals and competitive losses. Following the global financial crisis, Deutsche Bank was left scrambling for investment direction.
Stephen Isaacs, Chairman of the investment committee at Alvine Capital Management, claimed this goliath was bound to collapse.
“Every other European bank, I’m afraid to say, has had to face up to the reality that they can’t compete with the Wall Street players — go UBS, Credit Suisse and even the British banks. Come on, guys, it is extraordinary that it has taken this long, and only in the case of a complete collapse in the share price, and starting to see some of their key clients moving away,” Isaacs said.