Mega-banks look set to be cut down to smaller units
GERMAN financial giant Deutsche Bank’s expected move to sell much of its retail banking business will see it join a growing list of banks choosing to shrink and simplify to survive.
The benefits of size and reach, for years considered the holy grail of global banking, are now seen as being outweighed by the cost and complexity of running businesses across dozens of countries.
Many banks have given up on trying to offer everything to everyone.
But as unwinding years of expansion proves difficult, pressure for action has intensified, with politicians showing little patience with institutions they consider too big and complex and investors wanting more return on equity (RoE).
After missing financial targets and racking up a raft of regulatory fines and problems, Deutsche Bank’s board is expected to agree soon to sell retail arm Postbank and take a knife to its investment bank.
Meanwhile, HSBC’s bosses responded yesterday to investor criticism over misconduct scandals and weak profitability by stressing how far they have shrunk and streamlined the bank in the last four years.
HSBC has already sold or shut 77 businesses and could yet dispose of big operations in Brazil or Turkey.
Credit Suisse is also expected to slash trading operations and pull back from other areas, while Barclays chairman John McFarlane signalled on his first day on Thursday that he will also wield the knife. – AFP