The news that Deutsche Bank A.G. (NYSE: DB) would fire 7,000 people is a day old, but it is worth considering why the people lost their jobs.
Management was overreaching as it tried to compete globally with other banks and investment houses. It did not work. Thousands of people get to pay the price.
The bank clobbered its Equities Sales & Trading businesses and cut leverage exposure in its Corporate & Investment Bank unit. Combined that with other moves and:
Together with its decision to right-size the expense base in the Corporate & Investment Bank, Deutsche Bank will accelerate the pace of cost reduction across the organisation. In 2018, as already announced, the bank envisages adjusted costs not to exceed €23 billion. For 2019, the Management Board plans to reduce adjusted costs to €22 billion with no further significant disposals currently planned.
In connection with the implementation of these plans, the number of full-time equivalent positions is expected to fall from just over 97,000 currently to well below 90,000. The associated personnel reductions are underway.
“Personnel reduction” is a clinical way to describe the layoffs.
Deutsche Bank might have considered long ago that the likes of Goldman Sachs and JPMorgan Chase were not worth chasing. Their global networks, relationships with customers and balance sheets made them close to invulnerable, at least against the likes of an up-and-comer like Deutsche Bank. Yet, it pursued the strategies until it bled its operating results.
An ugly ending to an ugly period of mismanagement. And thousands of people out in the cold.
The bank’s description of itself, which is oddly global:
We have established strong bases in all major emerging markets, and therefore have good prospects for business growth in fast-growing economies, including the Asia Pacific region, Central and Eastern Europe, and Latin America. In Europe, we are well placed to benefit from the aforementioned resilient conditions in our home market, Germany, and from continued strong levels of corporate activity in the euro zone.