Deutsche Bank cut 18,000 staff. Rivals and Wall Street insiders say it's still not enough.
- Rivals, Wall Street insiders and investors were unimpressed by the Deutsche Bank restructuring plan announced Sunday, despite the bank's decision to fire 18,000 people in what it characterized as a "radical transformation."
- As people streamed out of the bank's 60 Wall Street headquarters in NYC, one person stopped to give the doorman a high five, before saying "Goodbye."
- More than one person exiting the building could be overheard saying that while they still had their jobs, they felt that future job cuts may be coming.
- Click here for more BI Prime stories.
A steady drizzle dampened the clothes of the people streaming out of Deutsche Bank's 60 Wall Street headquarters Monday, a day after the bank announced it would fire 18,000 people. One older man turned to the doorman and gave him a high five. "Goodbye," he said.
Others left with blue folders tucked under their arms, just a couple with bank-branded tote bags.
The dismissed were coming from town hall style gatherings, convened to inform fired staff en masse about their benefits and next steps. Access cards were cut off. At one point Monday morning, an onlooker estimated that roughly five people were leaving through the revolving doors every minute, many more exiting than entering.
For the some 70,000 employees who were spared, the day wasn't much better, according to three employees. More than one person exiting the building could be overheard saying that while they still had their jobs, they didn't feel safe. More cuts might be coming, they said.
That was the prevailing wisdom across Wall Street as rivals, former employees and others struggled to understand how Deutsche Bank's proposed changes will put the beleaguered German bank back on firm footing. The firm said it would exit equity sales and trading, but chose to preserve most of its US and European equity research teams and the equity capital markets operation. While rates trading will be scaled back, fixed income research was untouched, according to the lender's statement. The bank told investors to look for the changes to take hold by 2022.
"Whatever the remaining businesses are, they don't make enough money to compete on the global landscape," according to David Hendler, an analyst at Viola Risk Advisors. "So what is the strategic worth of Deutsche Bank? It's not much, in and of itself."
Across investment banking and trading, where the lender has held a global presence, just two businesses ranked in the top three last year, according to industry data provider Coalition.
Credit trading, where the bank tied for first with JPMorgan, and securitized trading, where it tied for third with Citigroup, according to the data. Foreign-exchange trading for the Group of 10 nations ranked as high as fourth, the data showed. Equities ranked as high as tenth, and as low as 12th, according to the data.
"The true test of Deutsche Bank's future is what will happen to its credit trading and foreign-exchange businesses," according to a consultant who has worked with the bank in the past and asked for anonymity to preserve industry relationships. "Those businesses are still strong. How much they are cut will dictate if Deutsche Bank remains a global bank or becomes a regional player."
For now, the bank has said nothing about cutting those units. But it may have to if other parts of the enterprise aren't able to pick up some slack, people said. Overall, Coalition assigned Deutsche Bank a ranking of sixth last year among the world's largest investment banks.
One of the outstanding questions is how the bank will stay competitive in equity underwriting without a dedicated sales and trading operation to distribute the deals. One banker at a rival firm said the ECM business would be irreparably harmed without a trading arm.
"Irrespective of what they said they want to do, it's unlikely they will do well in" M&A banking, ECM or even other parts of fixed-income trading where they don't have a top franchise or scale to generate positive earnings, the consultant said.
Hendler said the lender's strategic plan doesn't assuage his concerns since it shows Deutsche Bank returning to its roots as a corporate bank just as the rest of the industry moves toward consumer banking and the higher and more sustainable margins it offers.
"Why are we going to believe that they are so smart in going the other way?" Hendler said. "They don't have the believable and they don't have the natural environmental ingredient to succeed that way,' he said, adding that the bank is at a strategic disadvantage because German consumers don't borrow as much as those in other countries.
Questions like those and others left many people across Wall Street scratching their heads Monday. Deutsche Bank's shares slid as much as 7% Monday, before closing down 6%.