According to the news report by Bloomberg, Deutsche Bank stated that it would be done with the majority of its job cuts by the end of June. The German lender’s Chief Executive Officer Christian Sewing made this announcement at a conference in New York, also saying that about 600 people had already left the company’s Corporate and Investment Bank business division since the beginning of this year.
According to the managing partner at the executive search company Signium, Aleksander Montalbetti, while this announcement maybe distasteful to some, it is the right thing to be doing for the company at this stage. He said that employees need to know what is happening and also deserve that clarity.
Sewing had promised last week that Deutsche Bank was going to cut another 7,000 jobs from its current numbers by the end of 2019. Since the large-scale re-structuring announcement had been made in April this year, this is the first time that the company has given a concrete figure in terms of the number of jobs that would be cut.
The biggest worry that the leaders of the company have is that this announcement may cause their top performers to jump ship. Sewing made things even clearer earlier this week, when he informed his teams of which divisions would face the job cuts. He did not, however, give specific number targets for each of the divisions.
Another thing that Sewing did not specify was how many jobs would be cut from the investment bank and how many from the newly created private and commercial bank. People who are aware of this matter had previously told Bloomberg that the company could be cutting as many as 1,000 jobs per year from the new retail bank.
A hiring freeze has been placed on units that have already cross their year-end expense limits, said Sewing.
While many analysts are worried about the bank’s declining revenue, Sewing said that the low hanging fruit that could really make a difference in the lender’s recovery was cutting costs drastically. He said that costs were the most pressing issue they were facing and that addressing that issue first was going make a huge difference.
Besides cutting staff, Deutsche Bank is also looking at other cost cutting avenues, such as moving their offices out of prime, high cost locations in the center of cities as well as reducing their payouts to IT vendors. In his presentation, Sewing showed that currently, the company incurs a cost of €3.5 billion (~$4.1 billion) for its vendors each year, and another €1.2 billion (~$1.4 billion) in real estate rentals every year.
By moving shutting down their offices in Houston and by moving out of their Wall Street office to a Midtown location, the company will already save millions in cost.
Despite the many steps outlined by Sewing on Tuesday, investors are still not convinced that it is enough. The bank’s share price dropped another 5%, to almost touch its all-time low (that occurred in September 2016). But this drop wasn’t all because of investor issues. The political crises in Italy also caused the shares of all European companies to fall – unfortunately for the bank. However, by Wednesday, the bank was able to regain some of its losses, gaining 1.6% on the previous day’s close.
With the company assailed from all sides at this time, including shareholders blaming the Chairman of the bank, Paul Achleitner, for a large part of the troubles the bank is facing right now, Sewing has a massive uphill task of dragging the bank out of the red.