Deutsche Bank will close all operations in Malta, as well as nine other countries, warning of two tough years of dividend cuts, pay restraint and thousands of job cuts.
New chief John Cryan admitted yesterday to grave problems in implementing strategic and cultural change at Germany’s biggest lender.
Cryan, who took charge in July, is under pressure to overhaul Deutsche, which is struggling to end costly litigation from past scandals and adapt to tighter banking rules.
“I do not think that 2016 and 2017 will be strong years,” Cryan told a news conference yesterday.
We know exactly where we want to go
“Deutsche Bank does not have a strategy problem. We know exactly where we want to go. But we have had a grave problem in implementing it,” Cryan said, addressing reporters in German, in contrast to his predecessor Anshu Jain who regularly drew criticism for never mastering the language.
Deutsche Bank’s staff will feel the pain in their pay packets, with remuneration linked more to profits and less to revenue. “I have said that it would not be all sweetness and light,” Cryan said, adding it would be unacceptable not to share some of the cost of the settlement of interest-rate rigging and consequences of poor past behaviour.
Asked about prospects for bonuses for the board in the face of an expected full-year loss in 2015, Cryan said it was up to the supervisory board to decide on payouts.
In its second-biggest job cuts ever, the lender is to axe 9,000 full-time jobs and 6,000 external contractor positions. Three-quarters of the other 20,000 jobs to go are at retail unit Postbank, which Deutsche Bank is spinning off.
“We were concerned that our shareholders thought cost-cut goals were not ambitious enough. We think they are realistic based on the need to remain competitive,” Cryan said.
Deutsche Bank had said late on Wednesday it would not pay a dividend for this year and next, the first time it has not done so since its post-World War II re-establishment in 1952.
As part of the overhaul, Deutsche Bank is splitting its investment bank in two and downsizing operations, severing ties with 50 per cent of its clients to concentrate on the relatively small portion that produce most of the revenue.
It posted a 20 per cent rise in revenue at its lucrative bond trading business in the third quarter, helping take the sting out of a record €6 billion group pre-tax loss.
Deutsche Bank has been in Malta since 2008, offering a range of administrative and banking services to hedge funds, fund of funds and other alternative investment vehicles.
It was also an important provider of custody services for local funds which will now need to seek an alternative. In 2010, it was granted a full banking licence by the MFSA and was planning to expand its presence in Malta.
The bank and its holding company contemplated finding a buyer when it was clear that it would be pulling out of Malta, but it eventually decided to liquidate and will eventually relinquish its licence, sources confirmed.
The bank employs a handful of people but in spite of its size, it had significant capital and was one of the banks of systemic importance that was assessed by the European Central Bank last year. It recently repatriated €4.2 billion to its headquarters to maximise its use of capital, leaving only €520 million in the Maltese economy.
The bank will also withdraw from Argentina, Chile, Mexico, Uruguay, Peru, Denmark, Finland, Norway and New Zealand.