Saturday 18 November 2017

Investors welcome Deutsche Bank's fresh start, shares jump

Deutsche Bank HQ, in Frankfurt
Deutsche Bank HQ, in Frankfurt

Deutsche Bank's shares rose more than 3pc on Monday as investors welcomed new chief executive John Cryan's plan to restructure the German bank and cull managers in a move to cut costs and put past scandals behind it.

Shares in Germany's biggest bank were up 3.5pc by 0830 GMT, the top performer in a slightly firmer European bank sector.

"The fresh start as far as personnel is concerned has been done. Now the bank needs to deliver substance," said Ingo Speich from Union Investment, one of Deutsche's top 20 shareholders.

Deutsche Bank is restructuring its business, splitting its investment bank in two and parting ways with some of its top bankers as the new chief executive sets out its most "fundamental" overhaul.

Mr Cryan has come under mounting pressure to reform the bank, as costly litigation from a series of scandals and the fallout from the Asian market rout pushed its valuation well below rivals such UBS and Credit Suisse , who had already embarked on their restructuring.

The German flagship lender announced a record pretax loss of €6bn in the third quarter and warned of a possible dividend cut.

As part of the overhaul, out goes Colin Fan, the Chinese-born co-head responsible for securities trading. An ally of Anshu Jain, the former co-chief executive of the bank, he came to public attention last year when he warned trading and investment banking staff against boastful or vulgar behaviour in a video to all his staff.

The head of Deutsche's wealth management business, Michele Faissola, will leave the bank after a transition period. He will be replaced by Quintin Price, a former BlackRock executive, who helped oversee the New York-based asset manager's overhaul of its active equity funds.

Stephan Leithner, Stefan Krause and Henry Ritchotte are also resigning from the management board.

"Deutsche Bank has rarely undergone such a fundamental reorganization in its history. This also requires tough decisions," chairman Paul Achleitner said in a statement on Sunday.

The overhaul, which comes just days ahead of an expected strategy update, is part of a wide ranging restructuring at European investment banks. Thousands of jobs cuts, business closures and billions of euros of capital raisings are on the cards as the new bosses of Europe's biggest banks respond to pressure to devise new strategies to revive them.

As part of the shake-up announced on Sunday, the sales and trading activities will form a new division called Global Markets, and will be run by Garth Richie, currently head of its equities business.

The corporate and transaction banking operations will be brought together in a Corporate & Investment Banking unit to be overseen by current investment bank co-head Jeff Urwin. Deutsche poached Urwin, a Briton, this February from JPMorgan, where he co-headed the global banking unit, having joined the US bank in 2008 as part of its acquisition of Bear Stearns.

Deutsche Bank will also split up its wealth management division into one business looking after its super rich clients and another focusing solely on institutional clients and funds.

The bank said all four of its main business divisions will be represented on the management board and it will abolish its second-tier group executive committee.


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