Deutsche Bank Is Considering More Cuts at Investment Bank

• March 28 2018
• Steven Arons, Stephen Morris, Elisa Martinuzzi

Deutsche Bank AG is conducting a fresh review of its investment bank that could lead to deeper cuts across the trading businesses, according to people familiar with the matter.

Deutsche Bank AG is conducting a fresh review of its investment bank that could lead to deeper cuts across the trading businesses, according to people familiar with the matter.

The bank’s U.S. operations are a particular focus, though the review stretches across the firm’s global trading unit, according to the people, who asked not to be identified because the discussions are confidential. Europe’s largest investment bank is examining businesses where it’s trailing competitors to determine if it should try to win back market share or exit, the people said.

Senior executives plan to complete the review, dubbed “Project Colombo,” within weeks, before deciding where to cut and where to invest, said two people. A spokeswoman for Deutsche Bank declined to comment.

The future of the investment bank, the lender’s largest unit by revenue, has been a central point of contention at the company as Chief Executive Officer John Cryan struggles to turn the business around since he took over in mid-2015. Investors’ frustration with the lack of growth at Deutsche Bank have prompted Chairman Paul Achleitner to search for a successor to Cryan, people familiar have said.

For more on the conflict between the CEO and Chairman click here.

As part of the investment bank review, cuts are being discussed at both big trading businesses -- equities as well as fixed income, currencies and commodities -- because they are expensive and haven’t performed well, said one person. However, the extent of a potential retrenchment is unclear because many traders just got big bonuses in an effort to retain top performers, this person said.

It’s also unclear how the search for a new CEO will affect the review.

Much of the prior cutbacks at the investment bank affected fixed-income trading, though revenue at the equities unit declined as well. The bank lost clients in late 2016 amid concerns about its financial strength. Revenue from trading has declined by about a third in the past two years.

The CEO last year merged the global markets division with the corporate and investment bank, reversing the decision from 2015 to split the businesses. In the 2017 overhaul, the bank named former finance chief Marcus Schenck to help oversee the new unit, while Cryan himself assumed oversight for the lender’s U.S. operations. The bank recently hired a former Goldman Sachs executive, Peter Selman, in a bid to revive the equities business.

“I am focused on growing revenue and prudently managing expenses to improve profitability,” Selman said in an interview earlier this year. Along with hiring graduates, Selman said he will invest in Deutsche Bank’s technology to build a “best-in-class electronic platform” over the long term. The bank already has good products for derivatives clients, he said.

To read more about Deutsche Bank’s equities business, click here.

Chief Financial Officer James von Moltke said at a conference in London last week that any cuts to the investment bank would probably be gradual.

“We will take actions to prune the business this year,” Von Moltke also said at the conference. Radical cuts are “not something we think is advisable and the right thing either for the franchise or for shareholders,” he said.

— With assistance by Donal Griffin