Just as the domestic banking sector is undergoing something of a revival (relatively speaking), we get a reminder of the lingering – and potential – problems faced by the sector within the eurozone, as Deutsche Bank (DBK:GR), Germany’s biggest lender, announced that it is cutting over 7,000 jobs globally, with the investment banking arm in London firmly in the cross-hairs.
Earlier this year, the bank said that it was scaling back its operations covering global equities and US bonds, together with its business serving hedge funds. After years of gearing up operations to compete globally with the likes of JPMorgan and Goldman Sachs, the group’s balance sheet is top-heavy with derivatives and fixed income securities, which are not as profitable as they once were due to a decade of loose monetary policy and tightening financial regulations. The axe is being wielded following consecutive losses over the past three years, with the group refocusing corporate strategy on Europe, primarily at the expense of its US and UK investment activities.
The mood had turned ugly in Frankfurt long before this strategic retreat had been announced, so little wonder that group chairman Paul Achleitner was forced to see off a no-confidence motion at last week’s annual meeting. The motion was brought by shareholders who have grown frustrated, not only by continued poor financial performance, but also by perceptions of ineffectual leadership of the supervisory board that contributed to delays in initiating remedial measures.