Big changes lie ahead at Germany's largest lender.
Deutsche Bank said yesterday its private and commercial unit saw revenues slip 2 per cent in the first quarter to €2.6 billion ($3.2 billion) and announced “significant” job cuts at its investment banking unit.
The income figure at the private banking unit, which encompasses wealth management, was “largely attributable” to specific one-time gains in the first quarter of 2017 outsizing the net positive of equivalent items in Q1 2018 by around €80 million, Germany’s largest lender said.
Across the bank, net profit plummeted 79 per cent to €120 million in the first quarter, which prompted its recently-appointed chief executive, Christian Sewing, to retreat from Wall Street and make “painful” job cuts at its investment bank.
In a statement, the lender said it would refocus its investment banking arm on serving European clients closer to its home market, par back operations in the US and Asia, and review its global equities business.
"These actions will involve cost reductions," Sewing said. "These cutbacks will be painful, but they are unfortunately unavoidable if we want to be sustainably profitable in the best interests of our bank, our clients and our investors."
He added that the bank is “on a good track both in the DWS asset management business and in our private and commercial bank, although we need to substantially improve profitability in both”. DWS, the bank’s asset management arm, debuted on the Frankfurt stock exchange last month in an initial public offering that saw Deutsche sell 22.5 per cent of the firm.
The official number of investment banking job cuts is unknown at this point, but media reports suggest thousands of roles could be in the firing line.
The bank’s share price swung wildly in yesterday’s trading, but closed down 1.3 per cent.
The overhaul of Deutsche Bank’s investment banking business could prompt the lender to boost its private banking and wealth management offerings in Europe.
In a statement yesterday, the Frankfurt-headquartered lender said its private and commercial bank “intends to focus on growing markets like Italy and Spain, while in wealth management, the bank will look to grow in Germany and international markets”. Last month, Deutsche offloaded its Portuguese private and commercial banking business to ABANCA, adding to a string of divestments made over the past year.
The bank is also said its management board, which used to have 12 members, “will become smaller as three members leave the bank”.
The most recent executive to leave the embattled bank was chief operating officer Kim Hammond, who was quickly replaced by Frank Kuhnke less than a week later.
Last year, Deutsche Bank announced it would hire 100 new relationship managers for its global wealth management operation. Among the raft of hires was former Coutts chief executive Michael Morley, who was selected last June to take the helm of Deutsche Bank Wealth Management’s UK business.