BERLIN: Deutsche Bank says its reorganization will mean spinning off its Postbank branches in Germany through a share offering, closing offices in some countries, and eliminating less profitable business at its investment banking division
Bank co-CEOs Juergen Fitschen and Anshu Jain made the announcements Monday as they provided more detail about the bank’s reorganization announced Friday.
Deutsche Bank has struggled to maintain the profits investors want to see while meeting regulatory demands to reduce risk, setting aside billions to settle allegations of past misconduct, and reducing overhead costs.
Deutsche Bank last week agreed to pay $2.5 billion to authorities in the United States and Britain to settle allegations bank traders rigged important market interest-rate benchmarks used to determine rates on a variety of debt, including mortgages and student loans.
The bank said its reorganization would make it more cost-efficient and simplify its operating structure, saving 3.5 billion euros ($3.8 billion) a year by 2020, against one-time costs of 3.7 billion euros to implement the changes.
The bank expects to hold an initial public offering for shares in Postbank and to see the division removed from its earnings statements by the end of next year. Postbank offers branch banking to retail customers in post offices around Germany.
The bank said that streamlining operations would reduce costs and improve financial controls. It said it would pull out of some countries to focus on countries and cities where it is strongest. It didn’t say which.
It plans to reduce leverage, or the use of borrowed money, at its investment banking division by 200 billion euros. Leverage enhances profits but increases risks of loss as well. And it said it would shift financial resoureces away from less profitable lines of business there.
Monday’s statement fills in details after a brief annoucement Friday, and follows Sunday’s announcement that the bank saw first-quarter net profit fall by half from the same quarter a year ago, to 559 million euros. Earnings fell despite stronger revenues from trading on markets because Deutsche Bank had to set aside an additional 1.5 billion euros on the quarter’s financial statement for penalties paid to U.S. and British authorities.
