Job Cuts Could Double
As Deutsche Bank AG (NYSE:DB) continues to be rocked by scandal, inside sources hint coming job cuts could be twice as big as previously reported. According to Reuters, the German bank’s finance chief told staffers 10,000 employees could lose their positions in the downsizing.
The bank is facing a $14.0-billion fine from the U.S. Justice Department, not to mention increased scrutiny of their derivatives holdings. The heavy legal fines are considered a serious threat to Deutsche Bank’s future cash flow, which explains why there are so many layoffs.
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Although some cuts were expected as a result, the comments made by CFO Marcus Schenck suggest analysts grossly underestimated the depth of those cuts. (Source: “Exclusive: Deutsche Bank considers thousands more job cuts – source,” Reuters, October 14, 2016.)
“Schenck said that the bank would need to cut another 10,000 staff to bring down costs,” said a person who attended the meeting with the chief financial officer. Their name wasn’t printed, owing to the sensitivity of the matter.
Considering Deutsche Bank already announced 9,000 job cuts in October 2015, the total number now accounts for 20% of their workforce. That would mean one in every five bank employees would lose their job in the coming months.
Such drastic measures could only be implemented over the course of years, but it could staunch the bleeding in Deutsche Bank’s share price right now. Investors need to be convinced the flailing bank can survive a slowdown in the global economy before turning bullish on DB stock.
The rumors come amidst a deep rethinking of Deutsche’s strategy. CEO John Cryan is mulling over changes to the megabank’s year-old turnaround plan, a plan which was drawn up before the recent scandals came to light.
Apparently, Deutsche’s geographic risk is also being reassessed.
Credits: Flickr.com/aecelikel
A second source to Reuters said management was also examining the countries where the bank was active to see “whether it was really worth its while (staying in those countries).”
The move to slim down operations has become a de facto trend across the banking industry, with Deutsche rival Commerzbank AG also slashing its workforce by 20%. However, it should be noted the cuts may be difficult to implement because of labor safeguards in Germany.
