Deutsche Bank to cut costs by US$3.8 billion in strategic shift

[FRANKFURT] Deutsche Bank AG plans to reduce annual costs by a further 3.5 billion euros (S$5.1 billion), cut back its ownership in the Postbank consumer unit and shrink the securities business to revive profitability.

Deutsche Bank aims to achieve a return on tangible equity of at least 10 per cent in the medium term, the Frankfurt-based company said in a statement Monday. It will reduce the number of countries or local presences by a much as 15 per cent by 2020.

Co-chief executive officers Juergen Fitschen and Anshu Jain are implementing their biggest strategic overhaul of their three-year tenure after failing to meet previous targets. They're under pressure from investors, battered by the worst stock performance among global peers during the co-CEO's tenure, amid concerns about the firm's legal costs and capital buffers.

"We must remain client-centric, but focus more sharply on mutually attractive client relationships; remain global, but become more geographically focused; and remain universal, but avoid trying to be all things to all people," Mr Jain and Mr Fitschen said in the statement.

Deutsche Bank plans to purchase shares in Postbank it doesn't own before selling a stake in the company to the public by the end of 2016.

After paying a record US$2.5 billion fine last week for rigging interest-rate benchmarks, Deutsche Bank posted first- quarter profit Sunday that beat analyst estimates, as debt and equity trading rose, pushing revenue to a near record.

Net income fell to 544 million euros from 1.1 billion euros in the year-earlier period, hurt by a 1.5 billion-euro charge for legal costs. Deutsche Bank's common equity Tier 1 capital ratio, a key measure of financial strength, fell to 11.1 percent from 11.7 percent at the end of 2014. Further headwinds are expected, the bank said.

Management was targeting an after-tax return on equity of at least 12 per cent by next year, a measure which stood at 3.1 per cent in the first quarter.

Deutsche Bank plans to retreat from some of the 70 countries in which it operates, while investing in the transaction banking, asset and wealth management businesses as part of the strategic overhaul.

BLOOMBERG