(Reuters) – Deutsche Bank (DBKGn.DE) said on Sunday that it would make major cutbacks to its investment bank.
The following are the main details of Deutsche Bank’s planned overhaul:
SHRINKING THE INVESTMENT BANK
Deutsche Bank will exit its equities sales and trading business, which in 2018 bought in 1.96 billion euros ($2.20 billion) in revenue, but will retain a small equity capital markets business.
It also plans to cut back its fixed income business – traditionally seen as one of the bank’s strengths – particularly its rates trading desks.
These cuts are expected to lead to 18,000 job cuts.
In total the bank plans to shrink the amount of risk weighted assets allocated to its trading operations by around 40%.
Deutsche Bank will create a bad bank, called the Capital Release Unit, to manage the wind-down of assets related to its investment bank.
These assets and businesses represented 74 billion euros ($83.06 billion) of risk-weighted assets and 288 billion euros of leverage exposure, as of December 31, 2018.
WHAT WILL DEUTSCHE BANK FOCUS ON NOW?
Deutsche Bank says its focus going forward will be on corporate banking, foreign exchange, deals including equity and debt capital markets as well as M&A, private banking and asset management.
COST OF RESTRUCTURING
In total Deutsche Bank said it expects the restructuring will cost it 7.4 billion euros between now and the end of 2022. It will take a 3 billion euro charge in the second quarter of 2019.
The bank says it can bear these costs without a capital hike, but it will lower its minimum common equity tier one capital ratio to 12.5% and will not pay a dividend this year or next. At the end of last year its capital ratio stood at 13.6%.
Deutsche Bank plans to cut costs by 17 billion euros by 2022 and reduce its cost-income ratio to 70%. At the end of 2018 the cost-income ratio was 92.7%.
Reporting by Rachel Armstrong. Editing by Jane Merriman