Deutsche Bank said to implement hiring freeze amid cost cuts

[ZURICH] Deutsche Bank AG is implementing a companywide hiring freeze as chief executive officer John Cryan seeks to lower costs and shore up investor confidence, according to people with knowledge with of the matter.

In a message to divisional chief operating officers on Wednesday, the Frankfurt-based lender said hiring will be put on hold with immediate effect, said the people, who asked not to be identified because talks are private. The hiring freeze affects all divisions excluding some control functions such as compliance, according to the people.

Mr Cryan, 55, is struggling to reverse a slide in shares that eroded almost half of the company's market value this year, amid concerns about mounting legal costs after the US Department of Justice requested US$14 billion to settle a probe into faulty securities. Since taking over in 2015, Mr Cryan has suspended dividends, scrapped bonus awards for top management and cut risky assets while eliminating some 9,000 jobs.

"It would be desirable if Deutsche Bank was restrictive in terms of new hires as they need to cut costs," said Philipp Haessler, an analyst at Equinet Bank AG in Frankfurt, with a neutral recommendation on the shares. "Another way to cut costs is reducing the bonus pool."

The shares fell 2.4 per cent to 12.05 euros at 12:03 pm in Frankfurt. They have dropped about 47 per cent this year, making them the fourth-worst performer in the 38-member Bloomberg Europe Banks and Financial Services Index, which slipped 23 per cent.

A spokesman for Deutsche Bank declined to comment on the hiring freeze, referring to an announcement on Oct 6, when the bank said it reached an agreement with labor representatives to cut 1,000 positions in Germany as part of the wider restructuring plan. The lender employed more than 101,000 people in June, up from 98,138 at the end of 2014.

Analysts at JPMorgan Chase & Co said in a note earlier this year that Deutsche Bank could save as much as 1.9 billion euros (S$2.91 billion) this year largely through a hiring freeze.

Mr Cryan last month sought to reassure investors that he doesn't plan to raise capital, saying that he expects US authorities to scale back their initial request. Deutsche Bank's negotiations with the Justice Department to resolve a years-long investigation into residential mortgage-backed securities are continuing, people familiar with the matter said earlier this week.

Deutsche Bank is holding informal talks with securities firms to explore options including raising capital should mounting legal bills require it, people with knowledge of the discussions said last week. The lender could also revisit selling its Deutsche Postbank unit or parts or all of its asset-management division, according to the people.

The CEO has already said Deutsche Bank may fail to be profitable this year after posting the first annual loss since 2008 last year. He also signaled that the lender may have to deepen cost cuts.

Deutsche Bank is scheduled to release third-quarter earnings on Oct 27.

BLOOMBERG