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Deutsche Bank's massive layoffs to hit Wall Street workforce

  • German investment banking giant Deutsche Bank is cutting itself down to a much smaller size.
  • It's slashing its global workforce by 18,000 jobs, which will include cuts in the U.S., where it does much investment banking.
  • As part of the huge restructuring, the bank will exit the stock-trading business.

Frankfurt, Germany - Germany's struggling Deutsche Bank said Sunday it would cut 18,000 jobs by 2022, many likely to be in the U.S. The giant bank is downsizing its volatile investment banking division in a huge restructuring aimed at restoring consistent profitability and better returns to shareholders.

That includes moves such as dropping Deutsche Bank's stock-trading business. It also plans to slim the division focused on fixed-income investments.

When complete, the job cuts should reduce the workforce to 74,000. The bank wouldn't say where the layoffs would fall, but many of its investment banking activities are carried out in New York and London, meaning those locations would likely see a good deal of job losses. CEO Christian Sewing said the bank had already begun the job-cutting process.

The Frankfurt-headquartered investment bank said it would cut roughly a quarter of its total annual costs, from 22.8 billion euros ($25.6 billion) last year to 17 billion euros.

The aim is to focus on areas where the bank is among market leaders and on businesses with steadier earnings such as serving corporate customers. Deutsche Bank said it's going "back to our roots" with a radical restructuring meant to reduce its risk exposure and concentrate on its traditional strengths after a long period of trying to compete with global investment banking giants.

Finally, an annual profit

For years, Deutsche Bank has wrestled with regulatory penalties and fines, high costs, weak profits and a low share price. The bank went three straight years without turning an annual profit before recording positive earnings of 341 million euros for 2018. CEO Sewing took over last year and promised faster restructuring after predecessor John Cryan was perceived to have moved too slowly.

Deutsche Bank shares initially rose 2.5 percent on Friday to 7.18 euros as markets anticipated a restructuring announcement. That's far below levels from mid-2015, when the shares traded at over 30 euros. Shareholders received a dividend of only 11 cents per share for 2017 and 2018.

In later trading on Monday in Frankfurt, the shares were down 2.4%, to 6.99 euros. In premarket trading on Wall Street, Deutsche Bank's share price slid more than 4% lower, to $7.68.

The bank said one-time charges from the changes would mean a net loss of 2.8 billion euros in the second quarter. Excluding the charges, net profit would have been about 120 million euros.

Failed merger effort

The restructuring follows the failure in April of merger talks with German rival Commerzbank. Deutsche Bank said the combination wouldn't make business sense, but that left open the question of what strategy the bank could pursue to make its business leaner and more profitable.

As part of the restructuring the bank said it would create a separate unit to dispose of billions in investments that are less profitable or no longer fit its strategy. The bank said it didn't expect to have to raise additional capital from shareholders.

Deutsch Bank paid billions in fines and settlements related to behavior before and after the global financial crisis, including a $7.2 billion settlement in 2017 with the U.S. Justice Department over selling bonds based on mortgages to people with shaky credit. But that hasn't ended the negative headlines.

Two congressional committees have subpoenaed Deutsche Bank documents as part their investigations into President Donald Trump and his company. Deutsche Bank was one of the few banks willing to lend to Mr. Trump after he went through a series of corporate bankruptcies and defaults starting in the early 1990s. President Trump had sued Deutsche Bank to stop the subpoenas, but a judge in May ruled against his suit.