Deutsche Bank eyes shake-up after record losses
‘Its not all going to be sweetness and light’
In this Oct 30, 2014 file picture the Deutsche Bank headquarters are photographed in Frankfurt, Germany. Deutsche Bank, Germany’s biggest, says it lost 6 billion euros (US dollars 6.6 billion) in the third quarter due to large charges for the fallen value of two of its major divi- FRANKFURT, Oct 29, (AFP): Deutsche Bank, Germany’s biggest lender, said Thursday it would axe tens of thousands of jobs, sell off assets and pull out of 10 countries in a vast overhaul after record losses in the third quarter.
“It’s not all going to be sweetness and light,” the bank’s new co-chief executive John Cryan, who took over from disgraced Anshu Jain in July, told a news conference.
He faced the press shortly after Deutsche Bank unveiled its biggest-ever quarterly loss of 6.01 billion euros ($6.6 billion) in the three months through September.
Cryan described the result as “highly disappointing” and said it would take nothing less than “a miracle” for the group not to report a loss for the full-year.
Deutsche Bank is currently mired in a tangle of litigation cases and was fined a record $2.5 billion in May for its involvement in rigging interest rates.
It has also faced probes by Swiss authorities for suspected price fixing on the precious metals market, and US investigators have looked at its Moscow branch on suspicion of possible involvement in money-laundering.
In the third quarter alone, Deutsche Bank set aside 1.2 billion euros in provisions to cover those costs.
In addition, it undertook massive writedowns on assets such as its stake in China’s Hua Xia Bank, thereby pushing it deep into the red.
On top of this, “our revenues were impacted by challenging market conditions with persistent low interest rates and uncertainty around the (US) Federal Reserve’s interest rate policy,” Cryan said at his first official appearance as co-CEO.
Declined Third-quarter revenues declined by seven percent to 7.3 billion euros.
Nevertheless, Deutsche Bank’s key capital ratio — a measure of its financial strength — rose slightly to 11.5 percent.
“Revenues in core businesses held up, despite mixed business conditions during the quarter with market volatility in August and September,” Cryan said.
In a bid to “stabilise the bank and turn around its long-term performance,” Cryan announced a series of stinging cost-cutting measures.
The bank will shut down onshore oper-
Thursday’s batch of data is unlikely to put Bank of England policymakers under fresh pressure to raise interest rates soon, especially after news this week that the economy slowed more than expected in the third quarter.
Britain was the fastest growing of the biggest developed economies last year and there is scant sign that its recovery is at risk of fizzling out. But business surveys suggest the pace of expansion has started to moderate recently.
The number of mortgages approved by lenders dipped to 68,874 in September from 70,664 in August, the Bank of England said, below all forecasts in a Reuters poll.
But total lending rose in September at the fastest rate since 2008, reflecting a rise in mortgage approvals in recent months and recent buoyant morale among Britain’s big-spending consumers.
There were signs that mood could fade towards the turn of the year. In a separate survey, the Confederation of British Industry (CBI) said retail sales grew at the slowest rate in six months in October after a big increase in September.
And British consumer confidence slipped to its lowest level since the end of 2013, the European Commission said. “The UK is doing alright, alarm bells are not ringing. But my point is throughout this year, we’ve had sub-trend GDP growth every quarter, if you exclude oil and gas,” said RBS economist Ross Walker, who does not expect a rate hike until around August next year.
Urgent “Whatever your timeframe was for monetary tightening at the start of the year, it can’t now be more urgent than it was then.”
The Bank of England’s policymakers meet next week but are not expected to raise rates until the second quarter of 2016, according to the median forecast in the most recent Reuters poll of economists.
Most investors expect the BoE will wait for the US Federal Reserve to move first. The Fed left rates unchanged on Wednesday but opened the door to an increase in borrowing costs in December by making a direct reference to its next meeting.
As a result, British government bond prices fell sharply on Thursday. They extended losses after new US data showed solid domestic demand in the world’s biggest economy that analysts said could keep the Fed on track for a December rate hike, even though overall growth was weaker than expected.
There were more signs that steady British economic growth and a recent recovery in wage growth are pushing up house prices more strongly.
Mortgage lender Nationwide said house prices rose by a stronger-thanexpected 0.6 percent in October compared with a 0.5 percent increase in September.
A lack of homes coming onto the market is expected to continue pushing house prices higher.
A National House Building Council report on Thursday showed registrations for new homes — which take place before building starts — suffered their first annual fall during the third quarter since early 2013. ations in Argentina, Chile, Mexico, Peru, Uruguay, Denmark, Finland, Norway, Malta and New Zealand. And it plans to move trading activities in Brazil to global and regional hubs.
At the same time, it will reduce its workforce by approximately 9,000 net full-time equivalent positions. Around 6,000 external contractor positions in its global technology operations would also go.
And over 200 branches in Germany will be closed, reducing the number of products on offer and streamline head office and operations.
“Sadly ... this is never an easy task, and we will not do so lightly,” Cryan said.
The measures are estimated to lead to gross cost savings of about 3.8 billion euros, including restructuring and severance costs of approximately 3.0-3.5 billion euros.
In addition, the bank plans to dispose of assets with a total cost base of around four billion euros and 20,000 full-time equivalent positions “over the next 24 months.”
That means that the bank’s headcount, which stood at 100,000 in September, would be reduced by around 30,000 in all.