LONDON, Oct 28 (IFR) - Deutsche Bank boss John Cryan said hewas planning to "accelerate and intensify" his restructuring ofGermany's flagship bank in the face of ongoing litigation anddifficult markets.
The prospect of more big changes at Deutsche next year is incontrast to European rivals Barclays and BNP Paribas, however,who reported strong results last week as evidence theirinvestment banks are on solid footings after recentrestructurings.
Barclays and BNP Paribas both said they had taken marketshare in the third quarter after seeing fixed-income revenuesjump about 40%, easing fears the big US banks are grabbingsignificant share from their European rivals.
Deutsche reported solid but unspectacular results, with itscore bond trading logging a 14% rise in revenues from a yearago. But Chief Executive John Cryan told staff his overhaul planneeded to be stepped up.
The threat of a hefty US fine and possible capital raisehave dogged Deutsche since it emerged in mid-September that theUS Department of Justice wanted to fine the bank US$14bn tosettle an investigation into mis-selling of residentialmortgage-backed securities.
Cryan said discussions with the US DoJ were "movingforward", but he declined to estimate when they would beresolved.
"Unfortunately, we must anticipate that the situation willremain tough for some time to come," he wrote in a letter tostaff. "Our environment has worsened further in some importantareas. As we indicated at the time of our half-year results, wewill have to accelerate and intensify our restructuring."
Cryan said concern around the US settlement had affected themarket's view of Deutsche Bank as an investment and createduncertainty among clients and about its financial planning andstrategy execution.
NEW PLAN
A US fine of about US$5bn would probably require Deutsche toraise at least that much from investors, analysts estimate.
"Once litigation issues are resolved, we'd expect DeutscheBank to announce a new strategic plan, involving further assetreduction, as well as potentially a capital increase," saidAndrew Coombs, an analyst at Citigroup.
Cryan is in the process of cutting 9,000 jobs and slashing assets through his Strategy 2020 turnaround plan and he warnedstaff in last week's letter he would be "more ambitious inheadcount reduction".
That includes a hiring freeze across the bank. Annual churnis estimated at between 7,000 and 10,000, so that could accountfor much of the headcount reduction, as it has at rival Barclaysin the past year.
Credit Suisse is under pressure to show progress in itsrestructuring when it reports this week, after tentative signsthe plan set out by new CEO Tidjane Thiam is gaining traction.
Swiss rival UBS posted a 44% plunge in underlyingthird-quarter profits at its investment bank. Analysts said itsuffered from its shift away from fixed income at a time ofstrong debt market revenues, although the bank was also weak inequities and underwriting, which could raise concern itsturnaround had stalled.
STRATEGIC TWEAKS
US banks, Barclays and BNP Paribas all said they had beentaking market share, and bankers and analysts said that waslikely to have been at the expense of Deutsche and CreditSuisse.
"I think our market share is growing at a time that some ofour competitors are contracting or withdrawing from segments,"Philippe Bordenave, chief operating officer at BNP Paribas, toldIFR.
"Some other banks clearly are retrenching and are leavingsome market share on the table, so there is some room for marketshare gain for the others."
Barclays began restructuring its investment bank in May 2014and Staley said he liked its footprint and size after furthercuts made in January, when it pulled back from Russia, Braziland seven countries in Asia.
"We think we have the right amount of risk capital allocatedto the investment bank, so we like our position today and wehope to continue to move that business forward," Staley said.
Banks further ahead in their restructuring are likely to tryto drive home their advantage by pushing ahead with cost savingsand new technology to improve efficiency, bankers said.
BNP Paribas unveiled changes to its CIB strategy inFebruary, which involved job cuts, reducing 20bn ofrisk-weighted assets and trimming some businesses, countries andclient portfolios. It aims to save 1bn in annual costs by 2019and focus on business that generates fees at a low cost ofcapital.
"The business is changing, especially with the arrival ofnew digital technologies, and we are adapting. It's well underway and I think it's well accepted and is evolving. It's more achange in the way we do things, rather than a change in productsand geography," Bordenave said. (This story will appear in the October 29 issue of IFRMagazine; Reporting by Steve Slater)
Barclays (BARC)
