Deutsche Bank Reveals New Overhaul Strategy To Boost Revenue

Deutsche Bank’s CEO, John Cryan presented a major overhaul plan this week in a bid to turnaround the fortunes of the struggling bank.

Under the new plan, the banking and trading divisions will be combined after having been separated in a previous reorganization effort in 2015. The unit will be headed by Marcus Schenck, the current CFO and Garth Ritchie a trading executive.

Cryan said that the new merged division will keep a focus on corporate clients while bringing down the number of hedge funds and similar financial institutions it services.

He also stated that the company would invest in client-facing jobs and eliminate back-end jobs The Deutsche Bank’s fourth quarter results missed analysts’ expectations and its market share in both equity and debt trading is currently at its lowest since the 2008 financial crisis.

Bloomberg

The fresh approach would be a significant shift from its existing policy, under which the bank has been trying to focus on financial institutions and improve revenue of its brokerage business. It will also enable Deutsche Bank to get companies to be clients of all of its three major divisions – trading, banking, and transaction banking. The firm has announced that it will be allocating 65 percent of the new unit’s risk-weighted assets to corporate clients, an increase from the current 55 percent.

In a statement Christopher Wheeler, an analyst in London with Atlantic Equities said,

What John is saying is rather than be a bank who runs around after other banks and financial institutions, we’re in the biggest corporate market in Europe and we want to be a part of that. That does lead to steadier business.

The new structure is an attempt by the CEO to stem losses in market share and revenue, along with reducing costs. A key goal for Cryan is to reduce costs by 700 million euros ($742 million) by 2018.

Under the overhaul plan, the bank has listed nearly 20 billion euros worth of risk-weighted assets of the division that will be managed separately henceforth and be reduced over time. This will bring down the unit’s return on equity by around 2 percentage points and will cut down close to 8 billion of the assets by 2020.

Cryan acknowledged in a letter to the bank’s employees that the new plan might seem like a step backward but said that it was the right structure to perform better in a dynamic and challenging market environment.

Charlie Harrison

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