Deutsche Bank is backing out of the U.S. and Asia to focus on its European client base, the firm announced Thursday.
In a quarterly-earnings statement Thursday, Deutsche said it would scale back certain areas of its struggling global investment banking business as part of a firm-wide restructuring intended to reverse declining profits.
The German bank will reduce its corporate finance businesses in the U.S. and Asia, pare U.S. rates sales and trading, and review its global equities business with an eye toward downsizing it, according to the statement. At the same time, Deutsche will focus on its corporate finance and rates activities in Europe, while aiming to expand its private and commercial banking business and asset management division DWS.
The changes will come with lay-offs for staff in the affected areas and businesses, the bank said.
“We have to act decisively and to adjust our strategy,” Deutsche's new CEO, Christian Sewing, said in a statement. “There is no time to lose as the current returns for our shareholders are not acceptable.”
Sewing took over as chief executive on April 8, replacing John Cryan, who had been at the helm since July 2015. The announcement followed a particularly dismal quarter for the firm, which reported a net loss of €2.2 billion ($2.7 billion) for the three months ending in December.
[II Deep Dive: Deutsche Bank’s Cryan Out, Sewing In as CEO]
In a letter to employees that was published on the bank’s website alongside the announcement, Sewing hinted at upcoming changes to the company, including pulling back from “not sufficiently profitable” areas in its investment banking business.
Thursday's announcement offers a clearer picture of how Deutsche will restructure under Sewing. By 2021, the firm said it expects roughly half of its revenues to come from its private and commercial banking business, where Sewing had served as president prior to becoming CEO, and from DWS, which spun out last month in an initial public offering.
DWS, formerly Deutsche Asset Management, had $843 billion under management at the end of December. The business remains majority-owned by Deutsche Bank, and accounts for almost all of the firm’s asset management business.
The bank said its whole asset management group had net outflows of €8 billion for the first quarter, which it attributed to redemptions from a European insurance client and a U.S. client. Assets under management declined 3 percent, partly reflecting these outflows.