Trends

What is happening at Deutsche Bank?

The German bank plans to make 18,000 layoffs between 2019 and 2022, cutting 20% of its workforce worldwide, beginning this same month of July. Their objective is to reduce operating expenses to a great extent, as well as to undertake a business restructuring that allows the entity to survive and return its profitability in the long term.

Deutsche Bank, fourth European bank by assets´ volume and 15yh in the world (Banco Santander is the 16th), has almost a century and a half of history since its foundation by seven German bankers, a textile entrepreneur and a politician, with the intention to facilitate international transactions of German companies.

But this century-old entity, listed in Frankfurt and New York, does not seem to to recover from 2008´s financial crisis. In a recent article Bloomber highlights how most of Wall Street’s financial firms have returned to similar sises as before the crisis , while the dismissals have not stopped in Deutsche Bank.

What are the dismissals for?

After three consecutive years of losses, Deutsche Bank obtained net profits of € 267 million in 2018. But the entity is highly indebted. It is currently carrying out an important cost reduction plan whose objective directly targets operating costs, with the intention of reducing them to below 22,000 million euros by 2022. Due to this restructuration, the company foresees losses € 2,800 million in its second quarter accounts.

The company, which has lost credibility among its investors due to the company’s collapse in the markets in recent years, has already announced the departure of Garth Ritchie, chief investment officer. This will be followed by the 18,000 employees that the company will lay off between 2019 and 2022, firing entire teams from the investment banking area.

The drastic decision was made after several failed merger attempts. At the beginning of this year Deutsche maintained serious conversations both with its Swiss rival UBS, and with the German Commerzbank. Both attempts to merge were frustrated by the costs and risks that they could entail for such entities.