By David McHugh, AP
FRANKFURT, Germany–Deutsche Bank says its reorganization will mean spinning off its Postbank branches in Germany through a share offering, closing offices in some countries, and eliminating less profitable business at its investment banking division
Bank co-CEOs Juergen Fitschen and Anshu Jain made the announcements Monday as they provided more detail about the bank’s reorganization announced Friday.
Deutsche Bank has struggled to maintain the profits investors want to see while meeting regulatory demands to reduce risk, setting aside billions to settle allegations of past misconduct, and reducing overhead costs.
The bank said the measures it was announcing would make it more cost-efficient and simplify its operating structure, saving 3.5 billion euros (US$3.8 billion) a year by 2020, against one-time costs of 3.7 billion euros to implement the changes.
They said the bank expects to hold an initial public offering for shares in Postbank and to see the division removed from its earnings statements by the end of next year. Postbank offers branch banking to retail customers in post offices around Germany.
The bank also said in a statement Monday that it intends to streamline the bank to reduce costs and improve financial controls. It said it would drop business locations in some countries to focus on countries and cities where it is strongest.
It plans to reduce leverage, or the use of borrowed money, at its investment banking division by 200 billion euros. Leverage enhances profits but increases risks of loss as well. And it said it would shift financial resoureces away from less profitable lines of business there.
Monday’s statement fills in details after a brief annoucement Friday, and follows Sunday’s announcement that the bank saw first-quarter net profit fall by half from the same quarter a year ago, to 559 million euros. Earnings fell despite stronger revenues from trading on markets because Deutsche Bank had to set aside an additional 1.5 billion euros for penalties paid to U.S. and UK authorities. Deutsche Bank made the payments to settle allegations bank traders rigged important market interest-rate benchmarks.
Deutsche Bank shares fell 3.3 percent in morning trading Monday in Europe to 30.15 euros.