Deutsche charts new course after settlement
German bank likely to focus on domestic market and corporate business
Deutsche Bank plans to put its home German market and corporate customers at the centre of its plans when it spells out more of its future strategy over the next few months, the lender’s finance chief said.
Marcus Schenck’s remarks make clear that the bank feels it is finally able to focus on reshaping its core business, after last month agreeing to a $7.2 billion (Dh26.45 billion) penalty over the sale of US toxic mortgage debt — its largest in a long line of legal battles.
“We want to go on the offensive,” Chief Financial Officer Schenck told a gathering of customers, striking an upbeat tone after months of uncertainty over the fine that had prompted fears that Germany’s largest bank would need a state bailout.
“We want to score goals,” he said, expressing relief that the fine had now been agreed. The penalty was lower than the $14 billion at first suggested by US authorities.
The original organisational change, launched in October 2015 by Chief Executive John Cryan, aimed to cut costs by reducing staff numbers and overheads and selling off some noncore businesses.
But towards the end of last year, staff numbers had barely changed from around 100,000 and there was little clarity on what the bank’s long-term business model would look like, increasing pressure on management to speed up its turnaround.
Even Christine Lagarde, the head of the International Monetary Fund, had taken the unusual step of questioning the bank’s business model, urging it to “decide what size it wants to have”.
There have, however, already been some indications about the direction the bank will take.
Repackaging
In November, two people familiar with the matter said that Deutsche Bank was looking to cut its loan securitisation business further starting with repackaged US mortgages.
As well as rolling back the repackaging and resale of US mortgages, European car loan securitisation and other areas may also be cut, the people said.
Such a move would mark a retreat from a core business that helped Deutsche become one of the most dominant investment banks in the world before the financial crash.
In paring back its presence, Deutsche would be responding not only to tighter regulation but also tougher market conditions.