The return to profitability comes after reports that the bank may post a net loss of 2.8 billion euros in the second quarter of 2019.
Chief executive of Deutsche Bank Christian Sewing said that the changes were a return to the roots of the bank to make it more profitable, leaner and innovative.
“I will stress though that what we have announced today is nothing less than a fundamental rebuilding of Deutsche Bank through which we are ushering in a new era for our bank,” he said.
The German bank announced that it would pull out of the equities sales and trading business and significantly downsize its investment bank.
The bank will reduce its risk-weighted assets currently allocated to its fixed income operations by roughly 40 per cent and will create a new capital release unit to manage the wind-down of assets related to business activities being exited or reduced.
The investment bank will refocus on financing, advisory, fixed income and currencies, with a plan for 75 per cent of its revenues to be generated in businesses where Deutsche Bank currently thrives, with plans to increase its return on tangible equity (ROTE) to over 6 per cent by 2022.
It is expected that the restructure plan will cost 7.4 billion euros and take until the end of 2022, but hopefully will reduce adjusted costs by a quarter to 17 billion euros over the next several years.
This would meet the bank’s goal of achieving a post-tax ROTE of 8 per cent, with the bank on track to hit that thanks in part to the 18 per cent ROTE of DWS and with the corporate bank not far behind.
Mr Sewing said that to achieve the rebuild, there would be significant staff cuts of 18,000 for a global count of 74,000 employees by 2022.
“I personally greatly regret the impact this will have on some of you. In the long-term interests of our bank, however, we have no choice other than to approach this transformation decisively,” he said.
Mr Sewing said there would be a strict separation between private and corporate clients to be more focused on the private client business.
“In our home market, we are already a market leader in many businesses. It is our stated goal also to achieve that position in areas where we are not yet leading but have strong growth potential by offering innovative digital solutions and outstanding advice,” he said.
Part of that digital solution was in a 13 billion euro investment by 2022 and appointing Bernd Leukert to the management board to significantly improve IT services to be more efficient and innovative.
The bank confirmed that it would fund its transformation using existing resources and, as a result, would not pay common equity dividends for 2019–20, with the bank expecting to have sufficient capacity for payments on addition tier 1 securities throughout the transformation phase.
Mr Sewing acknowledged that these changes would not be easy, particularly the job cuts, but it was necessary for the bank to come back to full strength.
“This is about thinking radically and thinking differently. It is about a new culture. A culture that enables rather than prevents.
“A culture that always puts the bank and its clients first, before the interests of the individual.”
