Deutsche Bank AG unveiled a radical overhaul that would see the lender exit its equities business, post a 2.8 billion euro (US$3.1 billion) second-quarter loss and cut the workforce by one-fifth to reverse a slide in profitability.
Chief executive officer Christian Sewing would shelve the dividend this year and next, and take restructuring charges of 7.4 billion euros through 2022 to pay for an overhaul that shrinks the German lender’s once-mighty investment bank along with its global footprint and key fixed-income business.
“Today we have announced the most fundamental transformation of Deutsche Bank in decades,” Sewing said in a statement on Sunday. “We are tackling what is necessary to unleash our true potential.”
Photo: AP
The scale of the revamp underscores the failure of Sewing and his recent predecessors to solve the fundamental problem: costs were too high and revenue too low.
After the government-brokered merger talks with Commerzbank AG collapsed in April, the CEO had few alternatives to bolster market confidence. His plan was approved by the board at a meeting on Sunday.
Some of the financial targets set out in the plan look overly optimistic and the goal of achieving a return on tangible equity of 8 percent by 2022 looks “highly improbable,” Citigroup Inc analysts, including Andrew Coombs and Nicholas Herman, wrote in a note to investors.
About 74 billion euros of risk-weighted assets would become part of a new non-core unit and the lender’s capital buffer would be reduced as part of the plan.
With the stock price down by half in the past two years, selling new shares was not an option and the bank said that it does not plan a capital increase to pay for the overhaul.
Instead, Sewing is tapping into the bank’s capital cushion to fund what he has billed as the bank’s biggest restructuring in decades — which means that he needs to be strategic with the scarce financial resources he can generate.
It would be the first time since at least 1993 that Deutsche Bank does not distribute a dividend.
The bank said that retail chief Frank Strauss and chief regulatory officer Sylvie Matherat, both board members, would leave this month.
The departure of investment bank head Garth Ritchie was announced on Friday last week.
Other executives would be on the rise. Stefan Hoops was named to oversee the new “corporate bank” unit that would combine the transaction bank and the lender’s corporate-clients unit.
Three management board members where appointed: Christiana Riley is taking over responsibilities for the Americas; Bernd Leukert, formerly of SAP AG, would join on Sept. 1 and be responsible for data and innovation; and Stefan Simon would become chief administrative officer, and oversee regulatory and legal affairs.
The investment bank is the focus of the overhaul. The unit, which accounts for about half of Deutsche Bank’s revenue and which was the cause of its decline, would be broken in two.
The bank is accelerating its shift away from institutional trading clients, like hedge funds and asset managers, and would instead focus on servicing big companies, offering them cash management, trade finance and hedging.
The change is designed to accelerate the shift away from acting as the first port of call for institutional clients such as asset managers and hedge funds toward selling cash management, trade finance and hedging products to corporate clients.
The new division, headed by Hoops, would be at the heart of the lender’s future business model.
“We remain committed to our global network and will help companies to grow and provide private and institutional clients with the best solutions and advice for their respective needs — in Germany, Europe and around the globe,” Sewing said on Sunday.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day