Germany’s largest bank is likely to announce a sweeping overhaul, including a potential cut of 20,000 jobs to address some of the institution’s long-term problems, sources familiar with high-level discussions told The Wall Street Journal. The changes at Deutsche Bank, which also include key management positions, come as its shares reached an all-time low.
The bank has made several attempts to reorganize its business, including a merger attempt with its rival Commerzbank. Talks failed in April with Deutsche Bank pointing to the additional costs and risks associated with a merger as key issues.
Several members of the bank’s top leadership are also expected to depart. Investment banking chief Garth Ritchie resigned on Friday, whilst Frank Strauss is to quit as the head of retail banking amid reports that he disagrees with the bank’s overhaul strategy.
The commitment to change was confirmed by CEO Christian Sewing, who joined the organization just over a year ago. Speaking to shareholders at the bank’s annual general meeting in May, Sewig said: “We will accelerate transformation by rigorously focusing our bank on profitable and growing businesses which are particularly relevant for our clients. That is my pledge, and you can be sure of that.”
Job cuts in the organization may be as high as 20,000, with equities trading and research, along with derivatives trading, likely to be hit the hardest.
“I can assure you: We’re prepared to make tough cutbacks,” added Sewing.
Despite assurances by top management, Deutsche Bank’s shares reached a record low last month at $6.61.
The bank received a further blow on Friday as it received a downgrade from Fitch Ratings to “BBB”, two levels above junk status. The agency said that positive rating action may be taken if the bank stabilized its business model and generated acceptable returns through changes to the corporate and investment banking business, the accelerated business integration of the private and commercial banks, and cost discipline.
“However, we believe that a further restructuring would be difficult to implement,” said the agency in a statement. “Failure to deliver a business mix with more adequate returns and strengthened ability to generate capital internally could lead to a further downgrade of the ratings.”