Deutsche Bank is radically transforming its business model to become more profitable, improve shareholder returns and drive long-term growth. To execute its transformation, the bank will significantly downsize its investment bank and aims to cut total costs by a quarter by 2022.
The highlights of the new strategy are:
- Creating a fourth business division called the Corporate Bank which will be comprised of the Global Transaction Bank and the German commercial banking business.
- Exiting the Equities Sales & Trading business and reducing the amount of capital used by the Fixed-Income Sales & Trading business, in particular Rates.
- Returning 5 billion euros of capital to shareholders starting in 2022, facilitated by a new Capital Release Unit (CRU) to which the bank plans initially to transfer approximately 288 billion euros, or about 20% of Deutsche Bank’s leverage exposure, and 74 billion euros of risk weighted assets (RWA) for wind-down or disposal.
- Funding the transformation through existing resources including maintaining a minimum Common Equity Tier 1 ratio of 12.5%. The bank expects to execute its restructuring without the need to raise additional capital.
- As a result, the bank’s leverage ratio is expected increase to 4.5% in 2020 and approximately 5% from 2022.
- Reducing adjusted costs by 2022 by approximately 6 billion euros to 17 billion euros, a reduction by a quarter of the current cost base.
- Targeting a Return on Tangible Equity of 8% by 2022.
- Investing 13 billion euros in technology by 2022, to drive efficiency and further improve products and services.
Christian Sewing, Chief Executive Officer of Deutsche Bank, said:
"Today we have announced the most fundamental transformation of Deutsche Bank in decades. We are tackling what is necessary to unleash our true potential: our business model, costs, capital and the management team. We are building on our strengths. This is a restart for Deutsche Bank – for the long-term benefit of our clients, employees, investors and society. In refocusing the bank around our clients, we are returning to our roots and to what once made us one of the leading banks in the world. We remain committed to our global network and will help companies to grow and provide private and institutional clients with the best solutions and advice for their respective needs – in Germany, Europe and around the globe. We are determined to generate long-term, sustainable returns for shareholders and restore the reputation of Deutsche Bank."
Paul Achleitner, Chairman of the Supervisory Board of Deutsche Bank, said:
"This fundamental transformation is the right response to the major changes and challenges in the financial industry. Deutsche Bank has been through a difficult period over the past decade, but with this new strategy in place we now have every reason to look forward with confidence and optimism. We have a talented and dedicated team at the helm to relentlessly execute what we promise today and to create a sustainably profitable bank. Our shareholders have supported our bank’s restructuring for years and that’s why a substantial return of capital over time is an important part of our new strategy."