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Deutsche Bank could save US$2.2 billion staff costs, JPMorgan says
[LONDON] Deutsche Bank AG, which runs Europe's biggest investment bank, needs to cut costs further and could save as much as 1.9 billion euros (S$2.96 billion) this year largely through a hiring freeze, according to analysts at JPMorgan Chase & Co.
Deutsche Bank may update its cost-reduction targets when it publishes first-quarter earnings this month to "rebuild trust" with investors amid the "weak revenue environment," JPMorgan analysts wrote in a report from London on Monday. The US bank retained its "overweight" stance on the shares because quarterly results may show progress on cuts.
Deutsche Bank co-Chief Executive Officer John Cryan, who took over from Anshu Jain in July, is cutting 9,000 jobs and eliminating outdated and overlapping information technology systems to lift returns. His overhaul has been complicated by a downturn in global markets as lower energy prices and concerns over cooling growth weigh on revenue at investment banks.
"We think we have given new management too much credit based on cost discipline rhetoric, but are yet to see signs of any cost action," JPMorgan's Kian Abouhossein and Amit Ranjan said in the report. Their overweight recommendation has proved wrong so far this year, they wrote.
Deutsche Bank has fallen 38 per cent this year, the most of the 10 members of the BI Global Investment Banks Competitive Peer Group after Credit Suisse Group AG.
In addition to a hiring freeze, Deutsche Bank could lower costs by paying a higher proportion of staff bonuses in stock, increasing the share of junior employees in its workforce and cutting another 10 per cent of its 30,000 external consultants, according to JPMorgan.
Deutsche Bank's management should also commit to clawing back compensation if the bank will post a loss this year, according to the analysts.