Lender Deutsche Bank tightens its belt
The list of perks at Deutsche Bank is shrinking fast.
Investment bankers at Germany’s largest lender have been told to travel coach class on trains; fewer are able to attend conferences and some former employees said severance pay was less generous than previously. Even treats such as daily fruit bowls are disappearing.
The frugal ethos described by half a dozen people with knowledge of the company’s policies reflects CEO Christian Sewing’s focus on saving after a series of botched turnaround efforts.
The appointment of a new COO, Frank Kuhnke, as a direct report to Sewing is a signal that the CEO wants to have better control over processes and expenses. Kuhnke’s efficient yet blunt tactics have earned him the moniker “Frank the Tank”, one person said.
Sewing has been warning senior managers at the investment bank that if they cannot show they are able to control expenses, he will not trust them to be able to grow revenue either. Managers are being given fixed budgets they must not exceed under any circumstances, said the people, asking not to be identified in discussing internal information.
While a large part of the savings will come from laying off at least 7,000 people, Sewing is scrutinising noncompensation expenses to change a culture where budget overruns were often seen as trivial, the people said. That is especially true of the securities unit.
NEGATIVE SURPRISES
Sewing’s predecessor, John Cryan, had previously targeted more costly incentives such as a NetJets account for top executives, but expenses still spiked in the fourth quarter of 2017 as the bank set aside hundreds of millions of euros for bonuses to stem defections. Cryan, who once said he did not understand how “additional excess riches” drive people, later had to abandon a cost target, a decision widely seen as accelerating his ouster in April 2018.
“Deutsche Bank has a history of negative surprises on costs in the fourth quarter, including last year,” Sewing said on an analyst call in late July. “That pattern ends in 2018.”
A spokesman for Deutsche Bank declined to comment on the cost-saving measures.
Travel expenses are one focus of the cost cuts now being implemented. Investment bankers in London were scolded in 2017 by the then-regional head of the unit, Alasdair Warren, for their profligate travel spending, a person said. The unit is also reviewing expenses for legal and compliance matters.
Internal processes have long been a focus of cost cuts at the lender, but the bank has struggled to simplify them. It said earlier in August that internal reviews show its anti-money laundering processes remained too complex and there was a “need to improve in terms of internal processes”.