About 74 billion euros of risk-weighted assets will become part of a new non-core unit and the lender’s capital buffer will be reduced as part of the plan, which will avoid tapping shareholders.
Deutsche Bank AG will exit its equities business and post a net loss of 2.8 billion euros ($3.1 billion) in the second quarter as Chief Executive Officer Christian Sewing seeks to boost profitability and shrink the German lender’s once-mighty investment banking unit.
The lender expects restructuring charges of 7.4 billion euros through 2022 to pay for the radical overhaul and will shelve the dividend this year and next, according to a statement on Sunday. About 18,000 jobs will be eliminated in the restructuring.
About 74 billion euros of risk-weighted assets will become part of a new non-core unit and the lender’s capital buffer will be reduced as part of the plan, which will avoid tapping shareholders. The bank said it does not plan a capital increase to pay for the overhaul.
The bank said retail chief Frank Strauss and Chief Regulatory Officer Sylvie Matherat, both board members, will leave this month. The departure of investment bank head Garth Ritchie was announced on Friday.
The scale of the revamp underscores the failed turnarounds by Sewing and his predecessors to solve the fundamental problem: costs were too high and revenue too low. After government-brokered merger talks with Commerzbank AG collapsed in April, the CEO had few other options to bolster market confidence. His plan was approved by the board at a meeting Sunday.
The investment bank is a key focus of the overhaul. The unit, which accounts for roughly half of Deutsche Bank’s revenue and which was a major actor in its downfall, will be broken in two. The transaction bank will be lifted out and merged with the commercial clients segment that’s currently within the retail division, people familiar with the matter have said.
The change is designed to accelerate the shift away from acting as the first port of call for institutional clients such as asset managers and hedge funds toward selling cash management, trade finance and hedging products to corporate clients. The new division, to be lead by current transaction bank head Stefan Hoops, will be at the heart of the lender’s future business model.