Over the weekend, Deutsche Bank an aggressive restructuring plan to improve profitability.
In doing so, it’ll pull out of its global equities and trading business, and cut up to 18,000 jobs by 2022 of around 74,000 jobs. The bank hopes to reduce adjusted costs to 17 billion euros ($19 billion) over the next several years.
It also said it expects to post a net loss of 2.8 billion euros ($3.14 billion) as a result of restructuring-related costs when it reports second-quarter results on July 24, as noted by The Wall Street Journal. It’s also suspending its shareholder dividends for 2019 and 2020, with a hope of returning up to five billion euros to shareholders through dividends and buybacks by the time 2022 rolls around.
However, this doesn’t come as a big surprise.
In May 2019, CEO Christian Sewing noted the bank would accelerate its transformation by “rigorously focusing our bank on profitable and growing businesses which are particularly relevant to our clients,” as quoted by CNBC. “We’re prepared to make tough cutbacks.”
A History of Scandals and Fines
All of this comes after being pummeled by scandals, investigations, and fines that stemmed from the financial crisis and other issues. For example, the bank reached a $7.2 billion settlement deal with the U.S. Justice Department in January 2017 for allegedly misleading investors in the sale of mortgage-backed securities prior to the 2008 crisis. Weeks after that, the bank was hit with a $630 million fine over allegations of Russian money laundering.
Those fines came after the bank paid out $2.5 billion fines to U.S. and U.K. regulators for allegedly participating in a scheme to rig interest rates.
In short, the bank is attempting to grow again by shrinking first.
In fact, as pointed out by WSJ, “Executives are asking investors to believe that their turnaround plans are different, and more attainable, this time.”