Deutsche Bank Cuts 18,000 Jobs

One of the biggest employers in the City of London, Deutsche Bank recently announced that it will cut 18,000 jobs as part of a corporate restructure.

Some of the almost 8,000 staff in London have already started being let go, with share traders taking the brunt of the job slash so far. This all comes days after the head of investment banking at the organisation, Garth Ritchie, left the company.

 

  Reorganisation

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  What Caused the Cuts?

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Deutsche Bank is no stranger to difficulty, and anyone following the bank’s progress over the years will already know that they’ve had trouble returning to the profitability of pre-2007 crash levels.

The bank has been fined a total of €9.5 billion in recent years, a large majority of which was for deliberate mis-selling of mortgages and money laundering. These aren’t the only problems the bank has faced. There are current allegations of share trading schemes and off-shore tax avoidance, as well as a police raid at their German HQ last year, none of which has helped Deutsche’s image.

Additionally, the bank’s attempted merger with Commerzbank, the other German banking goliath, ended in failure. Both parties agreed there weren’t enough benefits to be made, citing increased costs and risks which outweighed any potential gains. This left Duetsch with few other options than to try and downsize.

It’s worth noting that a lot of the bank’s problems have come from it’s investment arm, so it could be speculated that these cuts are also a way of limiting any potential for future fines, or stock damaging negative publicity. The investment banking division was originally added in the late 1980’s, as Deutsch was keen to get involved in the then booming capital markets. Removing this division also fits with Christian Sewing’s vision of the bank returning to its foundations. Whether this will prove to be successful, only time will tell.

 

  Banking Future

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It’s not just Deutsche Bank that are sailing through troubled waters. The very reason Commerzbank entered into negotiations for a merger in the first place was due to struggles to maintain profitability.

One major factor that can’t be ignored is the increasing incorporation of highly cost effective AI and software solutions, especially in the financial sector in general. Before his departure, previous Deutsche Bank CEO John Cryan pointed this out, saying that thousands of employees at the bank could be replaced by automated procedures.

While manual process is clearly not the only reason for the Deutsche Bank’s difficulty and need to reorganise, it’s likely to have been a major consideration.

It’s also very possible that we’ll see more trends of this type in the banking industry going forward, with more openings for software development and engineering roles as opposed to traditional banking opportunities.