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Deutsche Bank to Attain Cost-Saving Target Through Layoffs

Deutsche Bank’s DB CEO John Cryan recently hinted his plans to reduce thousands of jobs by introducing technology in the bank’s operations, per an article by the Financial Times.

Cryan also revealed that the bank’s current employee strength is almost double than that of its competitors. His previous plan to cut about 9000 jobs over a period of five years, which began in late 2015, is currently on track.

He told Financial Times, “We’re too manual, which can make you error-prone and it makes you inefficient. There’s a lot of machine learning and mechanization that we can do.”

Further, Cryan foresees scope for branch closures as he feels that customers’ preferences are shifting to digital banking, as they hardly turn up physically at the branches.

On the other hand, the bank has added 24 managing directors at its corporate finance business in the United States with a view to restore growth by tapping on the growing appetite of U.S. companies for debt.

These restructuring initiatives are seen as an opportunity to manage costs which in turn would help counter the falling revenues. The bank had reported about 10% decline in revenues in its third-quarter results.

What accounted majorly for this decline was low level of volatility and consequently lower trading income, especially in the areas of fixed income and currencies.

Further, the past regulatory scandals continue to haunt the bank. Deutsche Bank recently agreed to pay $220 million as settlement over manipulation of the U.S. dollar, LIBOR and other benchmark interest rates. These legal costs have affected the bottom line to some extent.

However, falling share price and poor operating performance have created investors’ unrest about Cryan’s effectiveness. Though shareholders supported his capital raise move this year, they are closely monitoring his moves.

CEOs of other two major European banks, are facing the same fate. Pressure has been created on Tidjane Thiam of Credit Suisse CS and Jes Staley of Barclays PLC BCS, who started tenure in the same year as Cryan.

Shares of Deutsche Bank have lost 7.9% year to date versus 17.5% rally for the industry.

Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A stock worth considering in the same space is Royal Bank of Scotland PLC RBS. It witnessed an upward earnings estimate revision of nearly 16.7% for the current year, in the past 60 days. Its share price has increased 32% so far this year. The company currently carries a Zacks Rank #2 (Buy).

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Credit Suisse Group (CS): Free Stock Analysis Report
Barclays PLC (BCS): Free Stock Analysis Report
Deutsche Bank AG (DB): Free Stock Analysis Report
Royal Bank Scotland PLC (The) (RBS): Free Stock Analysis Report
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