Deutsche Bank CEO Poised to Return Bank to Pre-Crisis Roots

(Bloomberg) -- Christian Sewing is preparing to undo over a decade of failed expansion at Deutsche Bank AG.

The chief executive officer may slash headcount by more than a fifth -- as many as 20,000 positions -- in what's shaping up to be the troubled lender's biggest makeover in years, two people familiar with the matter said. Some of the heaviest cuts would hit the investment bank as Sewing radically reduces trading of equities and possibly interest-rate derivatives outside Europe, other people have said.

Sewing may present his plan as early as this week, the people said, asking not to be identified as the matter is private. The supervisory board has scheduled a meeting to discuss the plan for next Sunday, they said. If implemented, the cuts could see Deutsche Bank's headcount could fall to the lowest level since 2006.

At least some of the job cuts will also come at the retail and commercial clients division whose head, Frank Strauss, recently said he's planning reductions at an annual rate of about 2,000 over the coming years. The asset management unit under Asoka Woehrmann has been accelerating job cuts as well.

Shares Gain

Deutsche Bank shares gained as much as 3.5% in Frankfurt trading amid a broader stock rally in Europe and were up 2.3% at 6.9 euros as of 12:21 p.m. The Euro Stoxx 600 index was up about 1%. The Wall Street Journal first reported on the plan to cut as many as 20,000 jobs.

It's not clear how Deutsche Bank would pay for a large-scale restructuring. Germany's biggest lender may need to raise 5 billion euros ($5.8 billion) from investors to implement the reported plans, Bank of America Corp. analysts said in a note on Monday. Sewing is seeking to avoid a capital increase because it would further dilute the holdings of shareholders who've already seen the value of their stock tumble, people familiar have said.

“Deutsche Bank is working on measures to accelerate its transformation so as to improve its sustainable profitability,” a spokeswoman said by email. “We will update all stakeholders if and when required.”

Turnaround Plan

Sewing's previous turnaround plan, unveiled shortly after he took over as CEO just over a year ago and before the failed talks with Commerzbank AG, has failed to restore the bank to a healthy level of profitability. The latest announcement caps a long series of strategy shifts stretching back to at least 2009 that alternatively called for growing and shrinking the investment bank.

Read More: Deutsche Bank's Lost Decade Haunts Sewing as Key Overhaul Nears

Deutsche Bank had 91,500 staff at the end of the first quarter, down from 95,400 when Sewing took over.

The lender is looking to hire 300 people globally for its wealth management arm by 2021, the unit's head, Fabrizio Campelli, said in an interview with Reuters on the weekend. He plans to hire those managers across Europe, America and emerging markets, Campelli said.

Deutsche Bank will also make changes to the management board, with investment banking head Garth Ritchie, Chief Regulatory Officer Sylvie Matherat and Chief Financial Officer James von Moltke all potentially leaving, people familiar with the matter have said. Sewing is likely to take over formal oversight of the investment bank, they said.

Deutsche Bank is also planning to set up a unit for assets such as long-dated interest rate derivatives it wants to wind down or sell in an effort to cut unprofitable business and free up capital for other areas lines, people familiar with the matter have said. The unit could hold as much as 50 billion euros in risk-weighted assets, they said. The bank had 347 billion euros of RWAs at the end of the first quarter.

--With assistance from Jan-Henrik Förster.

To contact the reporter on this story: Steven Arons in Frankfurt at sarons@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Keith Campbell

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