Via Financial Times

Deutsche Bank has restarted its job cuts programme, just six weeks after suspending redundancies during the coronavirus pandemic, as Germany’s largest bank tries to rein in costs and keep its restructuring on track.

In an internal memo to staff late on Tuesday night, chief transformation officer Fabrizio Campelli and HR head Michael Ilgner said: “The uncertainties of the coronavirus crisis have made it even more of an imperative that we stick to our transformation plan announced last July.”

Deutsche had “to save on compensation costs . . . Therefore we have to restart the individual restructuring conversations as originally planned, after temporarily suspending them in March”, the executives added.

Other large corporates and banks such as HSBC, which has pledged to cut 35,000 staff over three years, have also paused redundancies during the crisis.

Last summer Deutsche chief executive Christian Sewing unveiled a long-awaited overhaul, which saw it retreat from global investment banking and shrink its retail network in Germany. It will eventually result in 18,000 job losses — about 20 per cent of total headcount — and came alongside the creation of a €280bn bad bank to dispose of toxic or unwanted assets.

However, the plan, which was showing some early signs of success this year, has been derailed by the economic fallout from Covid-19.

Deutsche slipped back into a net loss of €43m in the first quarter, despite a surge in trading revenue at the investment bank, as it tripled reserves for souring loans in anticipation of a wave of potential defaults. It has so far stuck by its financial targets that require it to break even this year after five consecutive annual losses, and trim €2bn in costs in 2020.

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Investors remain sceptical. The stock has plunged 11 per cent since the start of the year and the bank’s market value is only €13.4bn.

Deutsche said in the memo that restarting the cuts so soon was “not something we do lightly”. It pledged to “mitigate to the maximum extent possible the adverse impact of these measures on our colleagues affected”.

In Germany, where half of the 18,000 job cuts will happen, workers’ representatives told the Financial Times that they were in a “constructive dialogue” with management. 

“The plans that are on the table all refer to voluntary termination agreements and early retirement,” said Stephan Szukalski, head of the German union of bank employees and a member of Deutsche’s supervisory board. “This is happening in a relatively quiet way and on a voluntary basis.”

As well as saving remuneration costs with redundancies, Deutsche is also using the pandemic as an opportunity to slash other expenses.

“Our experiences over the past eight weeks have also demonstrated to us how a new way of working can drive cost efficiencies, for example, through reduced external spend, travel and real estate,” said the memo.

In a separate speech to be given at the lender’s virtual annual meeting next Wednesday, Mr Sewing said he and dozens of his top managers would forgo a month’s pay.

The CEO, who a year ago attempted an unsuccessful merger with smaller domestic rival Commerzbank, added that Deutsche’s global scale and investment banking presence would be “something that will help us when consolidation in the European banking sector happens — as it inevitably will and must”.

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Investors and executives have called for cross-border mergers in Europe to help repair the fragmented and fragile banking sector, which is far less profitable than in the US and has been losing market share in investment banking for more than a decade.

At Commerzbank, negotiations with unions over 2,300 job cuts would begin this summer, chief financial officer Bettina Orlopp said on Wednesday, alongside the bank’s first-quarter results. 

Commerzbank similarly boosted provisions for bad loans fourfold and the stock dropped more than 5 per cent.