Deutsche Bank staff are bracing themselves for one of the most severe job culls in banking since Lehman Brothers collapsed a decade ago, with the German lender’s board set to approve plans to shed tens of thousands of people and more than €50bn of assets.
The first casualty was Deutsche’s investment banking chief Garth Ritchie, who resigned on Friday ahead of the restructuring that will cut as many as 20,000 jobs around the world. The axe will fall hardest on its underperforming operations on Wall Street and the City of London.
Signalling a retreat from Deutsche’s global ambitions and its aim to be Europe’s main rival to Goldman Sachs, the drastic restructuring could bring the most banking lay-offs since 26,000 employees lost their jobs when Lehman failed in September 2008. Post-crisis, big banks are no stranger to swingeing cuts. In 2011, HSBC said 30,000 investment banking positions would disappear over a three-year period.
Deutsche said Mr Ritchie, its highest-paid executive, was leaving by mutual consent after more than 20 years at the bank. The 51-year-old South African is expected to depart with a pay-off of more than €11m after signing new five-year contract only nine months ago, according to Financial Times calculations based on Deutsche’s standard severance policy. He has been paid about €36m since his appointment to the executive board three years ago.
Chief executive Christian Sewing will assume oversight for the struggling trading and advisory division and a broader management reshuffle is expected to be decided over the weekend.
Deutsche is likely to spread the redundancies over a number of years, but many employees are still steeling themselves for bad news first thing on Monday morning after a crunch board meeting to discuss the bank’s future as early as Sunday, according to multiple Deutsche insiders spoken to by the Financial Times.
Mr Sewing, just over a year into his tenure, is taking radical action after years of progressive decline in the investment banking business, which has been unable to adjust to the post-crisis regulatory crackdown that forced lenders to operate with more capital and less leverage.
The Frankfurt-based bank made €6bn of cumulative losses between 2012 and 2018 and raised €30bn in equity in the past decade, more than twice its current market capitalisation. Its share price is trading near the lowest in its 149-year history.
Mr Ritchie will leave the board by the end of July but will work as an adviser until November “to ensure a smooth transition of time-critical UK regulatory matters including Brexit-related issues”, the bank said.
“As the bank enters a new phase, it is time for me to do the same,” Mr Ritchie wrote in an internal memo to investment bank staff seen by the Financial Times. “I have thoroughly enjoyed my time here, even the challenging moments.”
With a total pay of €8.6m, Mr Ritchie was the lender’s best-paid executive last year, earning €1.6m more than his boss Mr Sewing and doubling his income from the year before, despite coming last among executives in achieving performance goals.
Since December 2017, Mr Ritchie has been paid a highly controversial “functional allowance” of €3m per year on top of his €3m base salary to reward “additional responsibility in connection with the implications of Brexit”.
The FT reported in May that Mr Ritchie could quit the lender because of disagreement over cuts to the investment bank and a lack of support from shareholders.
Deutsche’s corporate and investment bank has been lossmaking over the past two quarters. Mr Ritchie’s background is as an equities trader — an area likely to be hit hard by the planned restructuring — while Deutsche’s historical strength is in bond trading.
The bank’s restructuring plan, which will probably be put to its supervisory board this weekend, will lead to as many as 20,000 job cuts and more than €50bn of unwanted assets being hived off into a “bad bank”.
Paul Achleitner, chairman of Deutsche’s supervisory board, said Mr Ritchie had helped the bank “to weather an extremely challenging period and we wish him all the best for the future”.
In early June, Mr Ritchie and about 70 other current and former Deutsche employees became targets of a criminal investigation by Cologne prosecutors over their potential involvement in allegedly illicit tax transactions.
Aside from Mr Ritchie, people familiar with the matter said the bank was poised to announce the departure of Sylvie Matherat, its chief regulatory officer, over the weekend.
Ms Matherat, a former French central banker who is the only woman on Deutsche’s management board, has been heavily criticised over persistent anti-money laundering failures and other compliance issues that have damaged the lender’s reputation.
At least one new manager will be appointed to the executive board, according to people familiar with the matter, and existing responsibilities are likely to be redistributed.