Deutsche Bank forced into rethink as strategy overhaul stutters: sources

Mon Oct 10, 2016 11:45am EDT
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By Arno Schuetze and Kathrin Jones

FRANKFURT (Reuters) - Threatened with a multi-billion-dollar fine from U.S. regulators, Deutsche Bank's management is rethinking elements of its year-old strategic overhaul that has made faltering progress, people familiar with the matter said.

The organizational change, launched in October last year by the then new chief executive John Cryan, aimed to slash costs by cutting staff, overheads and selling off some non-core businesses at Germany's largest lender.

But a year on, with its staff numbers barely changed and little clarity on what the bank's long-term business model will look like, management is being forced to find ways to speed up its turnaround.

"There will be some tweaks, likely decided on this quarter," said one person familiar with thinking at the bank. "It will hit areas where the bank is making no money."

The need to adjust the flagging plan has been given added urgency following a U.S. demand to pay up to $14 billion for the misselling of toxic mortgage securities before the financial crisis.

Worries that a fine of that size would cripple Deutsche have sent its shares to a historic low, prompting speculation that the government could be forced to help a bank, whose returns have already slumped to zero.

Last week, Christine Lagarde, the head of the International Monetary Fund, took the unusual step of questioning the bank's business model, urging it to "decide what size it wants to have" after turbulent weeks in which its share price plunged.

Now management is re-examining the strategy that has also yet to convince many politicians in Berlin.   Continued...

Window cleaners are working on the facade of the headquarters of Germany's Deutsche Bank in Frankfurt, Germany, October 5, 2016.   REUTERS/Kai Pfaffenbach