Deutsche Bank said set to embark on big equities retreat following review

Friday, 25 May, 2018

Christian Sewing, the new CEO of Deutsche Bank, speaks at the bank's annual shareholders' meeting on May 24, 2018 in Frankfurt, Germany.

The bank, which is expected to announce a range of restructuring measures to coincide with its annual shareholder meeting Thursday, will sharply reduce its presence in the USA market, and has also started cutting activity in the Central Europe, Middle East and Africa region, the people said, asking not to be identified discussing private information.

The loss-making bank said after an abrupt management reshuffle last month that it aimed to scale back its global investment bank and refocus on Europe and its home market after three consecutive years of losses.

"In the foreseeable future, the group has no intention to carry out large-sized operations, because it is not possible", Jean-Laurent Bonnafé said, when asked by an investor at its AGM if BNP was "analyzing" Deutsche Bank.

Shortly before its annual shareholder meeting on Thursday, Deutsche Bank announced it would cut an additional 7,000 jobs by 2019 in a bid to make the lender profitable again. The lender is working on sharply reducing its presence in the U.S. equities market and has also started cutting activity in the Central Europe, Middle East and Africa region, according to another person with knowledge of the matter.

The reductions will take the number of jobs at the Frankfurt-based lender to well below 90,000 and lead to a restructuring charge of as much as €800m this year, it said on Thursday.

Professor Brian Scott-Quinn, Director of Banking Programmes at Henley Business School, told regarding the return to Germany retail banking: "We really no longer need Deutsche Bank".

"The equities business is a very sensible area to focus the cuts on seeing as they haven't been achieving the return on capital they want there", Neil Smith, an analyst at Bankhaus Lampe who has a buy recommendation on Deutsche Bank shares, said by phone from Dusseldorf.

"In investment banking it is the same as there are still good European investment banks which can provide a good service to German industry".

Its ranking for investment banking fees fell to 10th from 8th in the Americas between 2010 and 2017, to 15th from 6th in Asia-Pacific and to 3rd from 2nd in Europe.

Equities sales and trading headcount is being cut by 25% and the investment bank leverage exposure is being cut by 10%.

"We view this as confirmation of our view that drastic but necessary restructuring is impossible at this stage", KBW wrote. "The key issue for Sewing to focus on immediately is cost, where Deutsche Bank disappointed previous year".

Shareholders, fed up with a languishing share price and dwindling revenues, will call on the bank's management to speed up the recovery process at the AGM.

The bank's troubles and the turmoil surrounding Cryan's departure have put pressure on Achleitner as well.

Deutsche Bank CEO John Cryan was ousted in April, and now under the leadership of Christian Sewing, and according to reports, some big changes are being considered to cut costs.

Mr. Achleitner survived a motion to remove him from the supervisory board, with only 9 per cent of shareholders voting for the measure.