Deutsche Bank cuts 35.000 Jobs in Latin America
eutsche Bank, the biggest German bank, announced yesterday what it called a major restructuring.
Its new president, John Cryan, used his first press conference to present hard adjustment plans “to clean up the bank”.
After taking record losses of more than 6 billion euros in the third quarter, Cryan said the bank will reduce its workforce by more than 35,000 employees in the next two years. The bank will also suspend dividends for 2105 and 2016 and abandon 10 countries, including Mexico, Argentina and Chile.
When last July John Cryan took the controls of Deutsche Bank he knew that the situation was complicated for the largest German bank.
After a succession of scandals which range from mishandling mortgage rates to money-laundering the entity is now undertaking a major restructuring to address the crisis.
The record losses in the third quarter of this year obligated the bank to plan and execute a reduction in its presence and the layoff tens of thousands of people. This type of restructuring has not been seen since the 1950s.
“We have to be better,” said the executive to justify his decision to cut staff and leave Latin American countries (Mexico, Argentina, Chile, Peru and Uruguay), four European countries (Denmark, Finland, Norway, Malta) and New Zealand.
The most painful announcement by Cryan was downsizing. “I assure you that it will be done fairly and following a dialogue with working councils,” said Cryan.
The move caused, initially, a rare confusion in the bank’s agencies and international media, with layoff figures ranging from 9,000 to 35,000 employees.
These figures were correct. The bank plans to reduce its workforce by the equivalent of 9,000 full-time employees, 6,000 outside Germany, 4,000 in the European nation and other positions such as consultants in the IT, infrastructure and operations areas.
Cryan also announced that in the next 24 months, the bank plans to sell assets with a cost base of 4 billion euros. These assets include companies that employ another 20,000 people.
With the cuts, Deutsche Bank aims to save about 3.8 billion euros in annual gross costs, but will have to pay around 3,5 billion euros in severance payments.
The drastic measures announced Thursday by John Cryan were approved on Wednesday by the Supervisory Board of the bank.
The restructuring of the country’s largest bank envisages a reduction of the Executive Board of the institution, introduces changes in its investment banking, focuses on the future dealings with institutional clients and radically changes its asset management portfolio to deliver better service to its millionaire customers.
“Deutsche Bank does not have a problem of strategy. We know exactly where we want to go,” Cryan said during his first press conference in Frankfurt.
“However, for many years the bank has had serious problems when carrying out their strategy,” he added, to justify elegantly the losses, mainly because of amortization for banking investment and numerous scandals in which the institution has been involved. The last of them was related to the violation of the sanctions adopted against Iran and Russia.
“The results of the next two years will be adversely affected by the restructuring of the group and 2018 will be a decisive year,” the executive insisted. Unless a miracle happens, we will close 2015 with losses,” he added.