- Lender is embroiled in probe into alleged money laundering
- Bank said to plan cutting some 200 people as part of exit
Deutsche Bank AG will close its Russian banking and securities businesses as co-Chief Executive Officer John Cryan presses ahead with a plan to exit some countries and the lender grapples with a probe into alleged money laundering at its Moscow office.
Deutsche Bank is planning to cut about 200 jobs as part of the closure, according to people with knowledge of the matter, who asked not to be identified because the information is private. About 200 people will remain in transaction banking and 900 in IT functions, one person said. A spokesman in Moscow declined to comment on job cuts.
Cryan, 54, is seeking to reduce expenses to boost returns and is considering cutting the global workforce by nearly 25 percent, people familiar with the plans said earlier this week. Deutsche Bank is the biggest foreign securities firm in Russia so far to announce it will exit the country as industry profits slump amid the first recession since 2009. The bank is also being probed for alleged money-laundering in Russia, according to people familiar with the matter.
“Deutsche Bank has to decide what it wants to do and whether it wants to be in countries that have this kind of cultural risk of money laundering,” said Dirk Becker, an analyst at Kepler Cheuvreux who has a hold recommendation on Deutsche Bank shares. “The profits just don’t justify the kind of risk that they’re exposed to.”
The shares fell as much as 5.3 percent, the most in almost four weeks, and closed 4.4 percent lower in Frankfurt. The 46-member Stoxx Europe 600 Banks Index fell 2.9 percent.
The lender’s Russian corporate finance and markets businesses will now operate from international hubs, according to the statement.
Deutsche Bank traces its history in Russia back to 1881 when it acquired a stake in the Russian Bank for Foreign Trade in St. Petersburg. It became the leading investment bank in the country in 2006 after taking full control of Moscow brokerage United Financial Group. State-run VTB Group hired more than 100 of Deutsche Bank staff for its own investment banking start-up two years later, becoming the largest securities firm.
The bank said earlier this year it had suspended a “small number” of people employed in its Moscow equities trading operation pending the results of an internal review. Tim Wiswell, the former head of Russian equities who was among the people investigated, has since left the bank, people with knowledge of the departure said Sept. 8.
The lender’s probe has focused on whether $6 billion in trades in Moscow and London were part of a possible money-laundering scheme by Russian clients, people familiar with the situation said in June.
The legal issues surrounding alleged money laundering “could cost them a lot,” Andreas Plaesier, an analyst at M.M. Warburg in Hamburg, Germany, who recommends investors hold Deutsche Bank shares. “The bank may also be hoping that it can lower its legal bills by pulling out and showing that they are taking action.”
Germany’s largest lender said in April that it would exit as many as 10 countries as part of a plan to reduce adjusted costs by about 15 percent by 2020. Cryan, who took over from Anshu Jain in July, has pledged to tackle costs and cut back trading operations.
Deutsche Bank cut its credit exposure to Russia based on a country of domicile principle to 4 billion euros at the end of June from 4.8 billion euros six months earlier, according to its filings. Those loans focus on companies in “strategically important industry sectors,” according to the filings.
Deutsche Bank’s retreat from Russia comes as global financial firms that once pushed to expand in Russia are reducing their presence. French bank BNP Paribas SA exited its local fund-management venture, Austria’s Raiffeisen Bank International AG sold its pension fund and German reinsurer Munich Re shut its Moscow office.
Investment banking profits are down 62 percent this year as sanctions targeting many of Russia’s largest lenders, alongside the crash of oil prices and the ruble, curtail dealmaking. Fees paid by Russian companies are at their lowest since 2002, according to New York-based consultancy Freeman & Co.