Deutsche Bank Said to Plan Job Cuts at Investment BankElisa Martinuzzi, Ambereen Choudhury and Nicholas Comfort
Deutsche Bank AG, Germany’s biggest bank, plans to cut more jobs at its investment bank to lower costs as business stagnates, two people with knowledge of the plan said.
The bank is weighing the reductions, which come in addition to the 2,000 announced in 2012, over the coming months across its corporate finance, capital markets and trading businesses, said the people, who asked not to be identified because the details aren’t public. Managing directors are included in the plan, they said.
The cuts are a result, in part, of the bank’s decision to increase base pay for senior bankers, boosting fixed costs, two people said. While no decision has been made on the total number of job losses they will probably total about 500, another person said.
Deutsche Bank shares rose 1.8 percent to close at 32.45 euros in Frankfurt, outpacing the Bloomberg Europe Banks & Financial Services Index, which was little changed. The shares earlier rose as much as 3.2 percent, the biggest increase in more than two months.
Deutsche Bank joined JPMorgan Chase & Co. and Citigroup Inc. last week in saying investment banking revenue came under pressure in the first months of the year, which typically make the largest contribution to earnings. Clients are trading less as the Federal Reserve slows its monthly asset purchases and leaves bond investors preparing for rising interest rates. Some banks are facing pressure to raise pay as European Union curbs on variable compensation kick in this year.
“The swathes of recent legislation which have the net effect of increasing fixed costs render all institutions more vulnerable to short-term pressures as they are less flexible around their cost base,” said John Purcell, chief executive officer of Purcell & Co., a London-based executive-search firm.
Michael Golden, a spokesman for Deutsche Bank, said the company continues to manage headcount at the investment bank in line with goals to improve efficiency.
The investment-banking unit had a slow start to the year, Chief Financial Officer Stefan Krause told reporters at a banking conference in Paris last week. In January, Co-Chief Executive Officer Anshu Jain said on a conference call with analysts that 2014 will be challenging after a surge in legal costs and lower debt trading revenue spurred a surprise fourth-quarter loss.
Financial industry companies around the world announced plans to cut a total of more than 317,000 jobs over the last two years, data compiled by Bloomberg show.
Securities firms are still under pressure to curb staff numbers. The top banks may see combined revenue from trading, underwriting and advising on mergers drop 11 percent in the first quarter as clients cut back on activity, JPMorgan analysts wrote in an e-mailed report from London last week.
Deutsche Bank’s revenue from trading debt and currencies will probably fall 20 percent in the first quarter from a year earlier, according to the JPMorgan analysts. That business accounted for 22 percent of Deutsche Bank’s revenue last year.
Deutsche Bank’s last job cuts helped lower costs at its investment banking unit to 76 percent of revenue last year from 81 percent in 2012, company filings show. The firm has said it wants to reduce expenses at the unit to less than 65 percent of revenue next year.
Barclays Plc, the U.K.’s second-biggest bank by assets, is planning an overhaul of the investment bank, including headcount reductions and exiting some unprofitable businesses this year, a person with knowledge of the matter said last week. The London-based bank outlined plans in February to eliminate 12,000 jobs to curb costs after fourth-quarter profit declined from a year earlier.