Last checked at 
(Adds detail from Deutsche Bank overhaul)
By Steve Slater
LONDON, April 27 (Reuters) - Deutsche Bank's plan tojettison much of its German retail bank and withdraw from one inten countries sees it join a growing list of banks choosing toshrink and simplify to survive.
The benefits of size and reach, for years considered theholy grail of global banking, are now viewed as being outweighed by the cost and complexity of running businesses across dozensof countries.
Many bank bosses have given up on trying to offer everythingto everyone. But as unwinding years of expansion provesdifficult, pressure for action has intensified, from politicianswho show little patience with institutions they consider too bigand complex and investors wanting more return on equity (RoE).
"The underlying economics for banks ... means being allthings to all people is too big a burden to sustain," said BillMichael, head of financial services in Europe at consultancyKPMG. He cited low RoEs, high operational risk and heftypotential costs from regulation.
After missing financial targets and racking up a string ofregulatory fines and problems, Deutsche Bank said onMonday that it would sell retail arm Postbank, take aknife to its investment bank and exit seven of the 70 countriesin which it operates.
On Friday HSBC's bosses responded to investorcriticism over misconduct scandals and weak profitability byemphasising how far they have shrunk and streamlined the bank inthe past four years. HSBC has already sold or shut 77 businessesand could yet dispose of big operations in Brazil or Turkey.
Credit Suisse's incoming CEO Tidjane Thiam isexpected to cut trading operations drastically and pull backfrom other areas, while Barclays chairman JohnMcFarlane signalled on his first day on Thursday that he willalso wield the knife.
The message is clear: bold action is on the cards to createleaner and simpler models, even after big cuts in recent yearsat Barclays, Credit Suisse, Citigroup, Morgan Stanley, UBS and Royal Bank of Scotland.
"NOT A SCRAP OF EVIDENCE BIGGER IS BETTER"
Pressure for banks to downsize has intensidfied since theglobal financial crisis, which was preceded by a frenzy ofmergers and acquisitions of the kind that briefly made RBS oneof the world's biggest banks.
The Bank of England's chief economist, Andy Haldane, said in2009 that "there is not a scrap of evidence of economies ofscale or scope in banking -- of bigger or broader being better".
Politicians worry that large and complex banks can missproblems, struggle to instill a common culture and are too hardto manage.
Efforts by some national regulators to limit capitaloutflows have also encouraged lenders to quit countries in whichthey lack scale.
Investors, too, are questioning the benefits of size as theylose patience with promises that returns will recover, withvaluations reflecting their preference for simpler companies.
Wells Fargo, which focuses mainly on U.S. retail andcommercial banking, is now the world's biggest bank by marketvalue. Its shares trade at 1.6 times book value, compared withan average for U.S. banks of close to book value.
Lloyds' focus on UK retail and commercial lendinghas helped its shares trade at a big premium to rivals, whileDeutsche Bank trades at only 0.6 times book value.
"SYSTEMICALLY IMPORTANT"
The main challenge for bosses is how far to go.
Most banks want to continue offering a range of services --from personal savings accounts to takeover advice for companiesand wealth management for rich clients -- but to fewercustomers.
Some bankers argue that simplification reverses two decadesof globalisation that have benefited trade and finance, andcould leave only three truly global banks: HSBC, JPMorgan andCitigroup.
JPMorgan has rejected calls for its break-up, saying scalehas always "defined the winner" in banking. It says not havingto duplicate audit functions or cybersecurity for the thousandsof clients that use more than one part of the bank saves it $18billion a year.
But demands that 30 'systemically important' banks hold morecapital, and the more intense regulatory scrutiny they face,also throw into question the benefits of scale.
The list of banks and their capital requirements are judgedannually on five criteria, including size, international reachand complexity.
Lloyds is not on the list and Wells Fargo's capitalsurcharge is 1 percent of risk-weighted assets, well below the2.5 percent HSBC and JPMorgan must hoard in case of losses -- inboth cases an extra $30 billion or more of capital.
One carrot from regulators is that surcharges can be reducedif banks simplify, as happened with UBS and Credit Agricole last year. (Editing by Catherine Evans and David Goodman)
