Restructurings and job cuts have become pretty commonplace at Deutsche Bank or investment company in recent years. Yet this latest one, by some measures the fifth since 2012, represents the most definitive attempt up to now to reshape Germany’s biggest lender. That is because it contains the most radical blood-letting to day at Deutsche’s investment-banking arm – unwinding a daring plan, hatched three years ago, and before the Iron Curtain came down, to make the bank a worldwide trading powerhouse. Most attention, rightly, has been on the 18,000 careers being cut by Deutsche worldwide. That’s only part of the tale, though, in what is a dramatic overhaul.
The bank or investment company is pulling out of some whole activities, most notably equity sales and trading, while reducing activity in others. For long-time observers of Deutsche in the town of London, where around 7,000 of its 8,000 employees work, this is very sad indeed. Subsequently acquired by the US lender Bankers Trust, which was bought by Deutsche in 1999, It has long been renowned among the City’s best & most considerate employers in an often brutal sector.
Its offices on Winchester Street, just south of Liverpool Street station, are known not simply for just one of the City’s best canteens also for an impressive art collection that seldom does not dazzle visitors. Those factors, however, also hint at the issues Deutsche has had in seeking to crack investment banking. A fancy art collection, a nice canteen and benevolence to the workers seldom point to a continuing business focused on cost control.
So it was with Deutsche. The bank’s progress into investment banking was characterized by attempting to employ the best people in the business, paying them the best incomes and then trying to build market share quickly. Growing earnings, the top line, was deemed more important than growing the bottom line – earnings – for a while. The expectation was that, as time passes, Deutsche’s market share would come to endure and that the profits would roll in.
The pure size of Deutsche’s balance sheet designed that, especially after the financial crisis, the bank or investment company was able to endure the need to rein in costs in these areas. Deutsche managed, unlike some British and American rivals, to avoid having to be bailed out by taxpayers or being pushed into being rescued by its competitors.
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That supposed that challenging decisions were deferred. The dream of beating the Wall Street “bulge-bracket” players like Morgan Stanley and JP Morgan survived the turmoil in ways it didn’t at, say, Royal Bank or investment company of Scotland. An old stating in business is never let the good problems go to waste materials. However, precisely because Deutsche did not encounter a few of the existential threats its rivals did during the financial crisis, problems were stored for later. America’s major banks, for example, were forced to recapitalise their balance sheets and offload non-performing loans relatively quickly.
That in turn enabled the united states economy to reunite on its foot more quickly following the crisis. The same thing didn’t happen in Europe at anything like the same speed which is one reason, ten years on from the problems, Europe’s economies are growing a lot more slowly. Only now could be Deutsche taking the action other rivals did about ten years ago.