Barclays, Deutsche Bank paths split as CEO plots retreat

27 April, 2018, 01:23 | Author: Sally Reid
  • The cuts will result in job losses and include a scaling-back of its business with hedge funds

Deutsche said on Thursday: "The bank will scale back activities in U.S. rates sales and trading, shrinking the balance sheet, leverage exposure and repo financing while remaining committed to its European business, which given its scale and relevance to our client base generates more attractive returns".

Sewing said the bank's management board had made a decision to act "decisively" in light of the division's performance.

Deutsche's investment bank has traditionally been strong in the fixed income markets, with rates trading a particular area of strength, but it has struggled to gain traction in the US.

That was nonetheless an improvement from a 2.4 billion loss in the last quarter of 2017, when the company had a large one-time loss related to tax changes in the U.S. First-quarter revenues fell 5 percent to 6.98 billion euros ($8.5 million).

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Christian Sewing, the new CEO of Deutsche Bank expressed that he believes they are on the right track regarding private and commercial banking but they need to boost their profits substantially. His ouster this month also claimed another top executive, Marcus Schenck, a former deputy CEO who had been lobbying for a strong securities unit. The hedge fund held 975,000 shares of the major banks company at the end of 2017Q4, valued at $18.55M, down from 1.25 million at the end of the previous reported quarter. Business focused on just the United States or Asia would be reduced. "These reductions are painful but regrettably unavoidable to ensure our bank's competitiveness in the long run", Sewing said.

Thursday's announcement offers a clearer picture of how Deutsche will restructure under Sewing.

Glg Llc decreased its stake in Deutsche Bank Ag (Call) (DB) by 22% based on its latest 2017Q4 regulatory filing with the SEC. The bank pulled about $14 billion (10 billion pounds) of risk-weighted assets out of "low-returning" corporate lending and shunted it into higher-risk, higher-return trading divisions, along with about 50 billion pounds of "leveraged balance sheet", according to a presentation that listed reasons for the improved performance. The lender had started to retreat from some businesses under Cryan, who said in 2015 that he would cut 10 percent of jobs, close operations in 10 countries and reduce the number of investment bank clients by about half. It increased its estimate for restructuring expenses to 800 million euros this year, up from an earlier estimate of 500 million euros, Chief Financial Officer James von Moltke said.

1Q sales and trading revenue EU2.45 billion, down 17%. Fees from capital markets underwriting and mergers and acquisitions advice, meanwhile, sank 27% to €480m, with the steepest fall (50%) coming from equity origination.

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