July 21, 2019
Latest News

Deutsche Bank begins restructuring efforts

By Paul J. Davies and Jenny Strasburg

Madrid Desk, Jul 9 (efe-epa- Deutsche Bank was quick to start firing staff from its investment bank on Monday. Its investors will need to wait much longer to discover how the German lender's radical restructuring will affect them, according to a report from the Dow Jones Newswires made available to Efe Tuesday.

Shares in the troubled global banking group fell sharply as investor skepticism set in during Monday's trade. The stock was down as much as 7.25 percent in the afternoon, its biggest one-day fall this year and a big reversal from a rise of more than 4 percent shortly after the open. It finished the day down 5.4 percent.

Chief Executive Christian Sewing gave more details in presentations on Monday of a plan to cut 18,000 jobs, slash group expenses by 25 percent and quit large areas of the investment banking business, a big drag on its performance.

He admitted returns have been unacceptably low and costs too high. "Too many resources went to businesses where we don't compete to win," he said. "Simply put, we kept too many options open," he said.

Despite the big promises, some shareholders said it would take time to see any results.

The restructuring appeared to go much further than expected in cutting businesses, and there was relief among investors that the bank said it didn't expect to ask shareholders for fresh capital to help pay for thousands of job cuts.

The costs of the overhaul will push Deutsche Bank into reporting a net loss of EUR2.8 billion ($3.14 billion) for the second quarter when it reports results on July 24. Analysts applauded the ambition of the plans, but were cautious because such major changes to the business could lead to greater costs and revenue losses than the bank expects, potentially leaving it still in need of capital. James von Moltke, chief financial officer, said there was significant uncertainty over whether the bank would break even in 2020.

Some analysts were skeptical of the bank's optimism over expected returns on equity, mainly because of doubts about its revenue forecasts even though it has targeted only 2 percent growth a year for its core businesses.

"The renunciation of a capital increase is basically positive, but will burden the bank's earning power for years to come," said Alexandra Annecke, portfolio manager at Union Investment in Germany. "The shareholders still need staying power."

Sewing attempted to show his own staying power and faith in the plan by pledging to invest a substantial amount of his own fixed salary into Deutsche Bank stock.

Most of the cuts will come in equities trading, while in Asia the bank will shut the majority of its equity-raising business, too, according to people familiar with the plans. Some staff in Asia and London were told they had lost their jobs on Monday, but there was less activity at the bank's Frankfurt headquarters.

"It is pretty apparent that within CIB (the investment bank) a lot of people didn't really show up today in Frankfurt, I think out of feelings of depression more than anything else," said one investment bank employee who didn't want to be named. "It's like a ghost town."

"The days of spectacular ambition in this [investment-banking] division are behind us," Sewing told reporters on Monday. He said the bank will focus its resources on companies rather than hedge funds or other asset managers, and invest in areas like cash management for European clients where it can earn more stable and sustainable profits. "We will reconnect this bank to what it used to be."

That said, it has no plans to trim down its US-focused business of creating and selling risky loans for private-equity backed companies, according to Sewing, despite widespread warnings from regulators and others of the growing risks in this market.

It will also continue to produce equity research as a stand-alone product to sell to institutional investors even though it won't offer equities trading. The bank said equity and macroeconomic research would support its advisory work for companies looking to do deals or list their shares on stock markets in its remaining equity capital markets business.

"Deutsche has a good product, but it is pretty hard to make money from stand-alone equity research," said Daniel Davies, a managing director at Frontline Analysts, an outsourcing and training firm for financial analysts. "This may have been cooked up by a manager who doesn't understand the importance of being in the flow of equity trading when it comes to equity capital markets."

Deutsche Bank also plans to spend EUR13 billion on technology and another EUR4 billion on improving its control even as it tries to cut EUR6 billion of costs. The bank has been hit by fines from US and European watchdogs for a range of compliance failures and risky transactions in Russia and elsewhere.

Two congressional committees are probing the bank's money-laundering controls broadly, along with its ties to President Trump, his campaign and people and entities connected to him.

Julie Steinberg, Bojan Pancevski and Patricia Kowsmann contributed to this article.

dj/ch

News history
British Airways suspends all flights to Cairo, citing security concerns

London, Jul 20 (efe-epa).- British Airways said Saturday that it has suspended all flights to Egypt's capital for seven days, citing unspecified security...

Kenya inaugurates Africa's largest wind farm

Loiyangalani, Kenya, Jul 19 (efe-epa).-Kenyan President Uhuru Kenyatta on Friday inaugurated Africa's largest wind farm, a 310-MW power station located in a...

Japan, South Korea trade fresh barbs over export curbs

Seoul, Jul 19 (efe-epa).- South Korea on Friday said Japan’s curbs on exports of high-tech materials critical for manufacturing of memory chips was in...

Trump nominates Eugene Scalia to replace scandal-ridden labor secretary

Washington DC, Jul 19 (efe-epa).- The president of the United States on Thursday nominated a right-wing corporate lawyer to be the new secretary of labor...

Microsoft's cloud business drives record sales

By Asa Fitch and Dan Gallagher

China reaffirms zero tolerance to corruption in New Silk Roads initiative

Beijing, Jul 18 (efe-epa).- China’s top anti-graft watchdog on Thursday reaffirmed its pledge of zero tolerance to corrupt practices in the country’s...

KLM diktat to cover up while breastfeeding in flights causes global outrage

The Hague, Netherlands, Jul 18 (efe-epa).- Dutch airline KLM is facing a storm of criticism for asking mothers to cover up while breastfeeding their babies...

Australian MasterChef star fined for underpaying his employees

Sydney, Australia, Jul 18 (efe-epa).- A high-profile chef who serves as a judge on the Australian version of the popular television show MasterChef and is...

Japan's trade surplus fell by 19 percent in June

Tokyo, Jul 18 (efe-epa).- Japan recorded a trade surplus of 589.5 billion yen ($5.5 billion) in June, a figure that is 19 percent lower than the one...

US-China trade war threatens economic growth in LatAm

Guayaquil, Ecuador, Jul 17 (efe-epa).- The already flagging economies of Latin America could be hurt by the ongoing trade war between the United States and...

Japan's curbs can damage global tech industry, South Korea says

Seoul, Jul 17 (efe-epa).- South Korea on Wednesday said Japan’s curbs on exports of high-tech materials critical for manufacturing of memory chips could...

Amazon faces EU antitrust probe for third-party retailer data use

Brussels, Jul 17 (efe-epa).- The European Commission on Wednesday opened a formal investigation into US tech giant Amazon to see whether its use of...

Paraguay taxi drivers again at war with Uber

Asuncion, Jul 16 (efe-epa).- Hundreds of taxi drivers suspended their service this Tuesday to again drive through the streets of Asuncion with a long...

Mercosur seeks to build on EU trade deal with new agreements

Santa Fe, Argentina, Jul 16 (efe-epa).- South American economic bloc Mercosur is seeking to build on a trade agreement reached with the European Union and...

US Treasury Secretary Steven Mnuchin

Washington DC, USA, Jul 16 (efe-epa).- Social media behemoth Facebook will not offer its Libra cryptocurrency services until it had been proven to meet the...

737 MAX woes hobble budget carrier Ryanair

By Oliver Griffin

Energy company says faulty cable was behind power outage in New York

New York City, USA, Jul 15 (efe-epa).- United States energy company Con Edison, which is responsible for the power outage that affected over 73,000...

Mercosur looking to expedite enactment of pact with EU

Santa Fe, Argentina, Jul 15 (efe-epa).- Officials from Mercosur member-states Argentina, Brazil, Paraguay and Uruguay said here Monday that they will urge...

Billionaire Buffett's real estate unit joins forces with Spain's LARVIA

New York, Jul 15 (efe-epa).- Berkshire Hathaway HomeServices, the real estate unit of billionaire Warren Buffett's Berkshire Hathaway Inc. conglomerate,...

Trump says tariffs taking a toll on China's economy

Washington, Jul 15 (efe-epa).- President Donald Trump said Monday that the tariffs imposed by his administration were taking a toll on China's economy,...

Huawei plans layoffs in US as blacklisting takes a toll

By Dan Strumpf

South Korea, Israel to push for early FTA deal

Seoul, Jul 15 (efe-epa).- The leaders of South Korea and Israel on Monday agreed to accelerate negotiations to reach a free trade agreement.

China's GDP grew 6.3 percent in 1st half of 2019, 27-year low in 2nd quarter

Beijing, Jul 15 (efe-epa).- China's gross domestic product grew by 6.3 percent during the first half of 2019, 0.5 percentage points less than in the same...

Former FARC rebels turn to coffee growing in Colombia

By Claudia Polanco Yermanos

I agree Welcome to news4europe.eu. We use cookies to improve your online experience. Find out more.