Deutsche Bank (NYSE: DB) has announced that it will be undertaking a major overhaul of its business as part of its plan to improve profitability. Deutsche expects its restructuring plan to cost 7.4 billion euros and eliminate 18,000 jobs by the end of 2022. Deutsche Bank’s CEO Christian Sewing said in a corporate press release, “Today, we have announced the most fundamental transformation of Deutsche Bank in decades.”
The Deutsche Bank units involved in selling stocks and bonds will be the focus of the reorganization and cost-cutting plan. Those units are mainly concentrated in New York and London. The current plan calls for cutting the size of a division that deals with securities that pay a fixed interest rate while exiting its equities sales and trading business. More than $300 billion in high-risk assets will be sequestered in a separate unit, where they will be sold off or retired.
In addition to reducing its global headcount to around 74,000 employees by 2022, the bank is also expected to shrink its nine-member management board. The specifics of that plan have not yet been revealed. The bank also said that it may report a net loss of 2.8 billion euros in the second quarter of 2019 after subtracting the costs involved in carrying out the plan. It will release its second quarter results on July 25, 2019.
This might be the troubled German lender’s last chance to reverse a decade of decline. Its share price has fallen 95 percent since its peak in 2007, hitting a record low in June. The high-risk businesses from which it generated much of its profit are no longer as profitable because regulators have restricted banks’ use of borrowed money. The firm has also faced scandals, investigations, and massive fines arising from the financial crisis and other issues in recent years.
In 2017, Deutsche Bank paid a $630 million fine over allegations of Russian money laundering and reached a $7.2 billion settlement with the U.S. Department of Justice for allegedly misleading investors in the sale of mortgage-backed securities prior to the 2008 financial crisis. Two years earlier, the bank was caught up in the Libor (London Interbank Offered Rate) scheme to rig interest rates with other big banks, including Barclays, UBS, and the Royal Bank of Scotland. Deutsche Bank paid a $2.5 billion fine to U.S. and U.K. regulators in that case.